Sony shares hit 3-year low after Vaio recall
Tokyo, September 5, 2008
Shares of Sony Corp fell more than 4 percent to their lowest in almost three years on Friday after the consumer electronics giant recalled 438,000 Vaio laptops due to possible overheating that could burn users.
Sony has been dogged in recent years by recalls of notebook computer batteries due to concerns they could overheat and catch fire. Dell Inc Apple Inc and other top PC makers recalled 9.6 million Sony batteries in 2006, costing the Japanese firm 51 billion yen ($481.5 million).
The company said the latest recall would have limited impact on its earnings. But some voiced concerns about Sony's reputation because the recall hit one of its main businesses and the company was slow to report the defect.
"It is not appropriate, considering how big the issue is," trade minister Toshihiro Nikai told reporters, when asked about Sony's handling of the case that it took one year to report after first learning about the defect.
Sony spokesman Shinichi Tobe said the company sees little impact on its earnings from the recall -- one of the biggest in computers since 2006. He declined to say how much Sony expected the recall to cost.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said a firmer yen and a decline in US shares likely triggered the share price drop on Friday, but the recall could damage the Sony brand if the company finds further such defects.
"If these things pile up and reveal that Sony's structurally weak, then its brand value will definitely be hurt," he said. Sony said the problem in the Vaio laptops, produced between May 2007 and July 2008, is related to irregularly positioned wires near the computer's hinge that can cause a short circuit and overheating.
Sony's Tobe said the company received the first report about the Vaio wiring trouble in August 2007 and had replaced parts individually for those computers that were affected.
It reported the problem to the Japanese authorities last month when there were more than 200 cases worldwide and moved to a voluntary recall, announced on Thursday.
The company considers the PC business as one of its seven pillars and aims to expand it to a 1-trillion-yen ($9.4 billion) business by the year ending in March 2011. -Reuters