Assault by battery: Sony's profits go up in flames

Sets aside $432m to pay for recall

By ElectricNews.net • Get more from this author

Posted in Financial News, 26th October 2006 22:14 GMT

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Sony's quarterly profits plunged 94 per cent following fall-out from its exploding battery woes.

The consumer electronic giant's predicament is there for all to see as it posted net profits of just 1.7bn yen ($14.3m €11.3m) for its second financial quarter on Thursday. Sony also reported an operating loss of 20.8bn yen ($175.6m €138.4m), down from an operating profit of 74.6bn ( $630m€496.5m) a year earlier.

Profit figures included a 51.2bn yen ($432m €340.9m) provision for charges linked to the recall of nearly 10 million faulty laptop batteries Sony supplied to several manufacturers, including Dell, Lenovo and Apple. Sony had initially estimated a recall of 5.9 million units but that has increased as more manufacturers recalled batteries, including Fujitsu which recalled 287,000 batteries earlier this month.

The recall was initiated after a small number of laptop users reported their devices spontaneously combusting.

Despite the firm's plummeting profits Sony posted sales up 8.3 per cent to 1,850bn yen ($15.6bn €12.3bn), with demand for Bravia LCD televisions and Cyber-shot digital cameras driving the growth.

The figures come in the wake of Sony reducing its estimated net profits for the year to 80bn yen ($675.5m €532.4m), down from 130bn yen ($1.09bn €865.2m). Sony's gaming division posted an operating loss of 43.5bn yen ($367.3m €289.5m) amid delays to the release of its latest flagship PlayStation 3 (PS3) console, allied to slowing sales for the PlayStation 2 and PlayStation Portable (PSP).

In contrast to Sony's recent misfortune, console rival Nintendo recently posted a profit of 67.1bn yen ($566.6m euro;446.6m) in the first half of the year.

The continued problems with the delayed PS3 have seen its European release delayed until March 2007. A shortage of the diodes necessary to operate the console's Blu-ray disk drive has reportedly been responsible for pushing back the release of the PS3.

Sony will release the console in Japan and the United States next month but only two million units will be ready for sale by the end of 2006, compared with the five million units of the Xbox 360 that Microsoft has already sold worldwide.

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