Dell (Nasdaq: DELL ) took the initial heat on a new recall of the lithium ion batteries that power many of its laptops, but it seems that Sony's (NYSE: SNE ) share of the responsibility is beginning to make its way to the forefront. Sony, after all, is the company that supplied the batteries.
The media's definitely fanning the flames of frenzy over the remote possibility that Dell laptops could burst into flames or, at the very least, smoke or overheat. Although the potential for either is apparently pretty low, a recall on the batteries is definitely the best way to protect consumers, so Dell deserves some kudos for that.
Although such recalls are pretty commonplace, what makes this one particularly noteworthy is that it's so large. With 4.1 million Dell owners potentially affected, it's the biggest product recall that Dell has ever undertaken.
This may be the last thing Dell needs right now. It's borne the brunt of a lot of negative investor sentiment here lately. But I can't help pondering Sony's role. Although many people have pointed out that Sony's battery sector is a small segment of its overall business, rumor has it that it supplies batteries to many of the heavyweights in computing -- not only Dell and Apple, but also Hewlett-Packard (NYSE: HPQ ) and Lenovo, which was previously part of IBM (NYSE: IBM ) . For now, the Dell laptops are the only ones being recalled.
Meanwhile, some news agencies are reporting that if Sony covers the cost of the recall, it might have to shell out anywhere from $85 million to $430 million -- the estimates vary. That might make some investors take another look at what looked like an improving earnings picture recently. Other news sources say the companies will share the cost of the recall, which could vary according to how many consumers opt to replace the batteries.
It's certainly not an original thought on my part to think this news could further tarnish Sony's brand in consumers' eyes. I think Sony has made so many missteps lately that its shareholders should wonder whether it's able to run its business in an efficient, competent, customer-friendly manner.
The spyware controversy of last winter is one such case in point, when Sony installed copy protection -- what many considered spyware -- on customers' computers when they downloaded music purchased from the Sony BMG unit.
Sony repeatedly insisted that it wouldn't delay its next-generation PlayStation product -- and then, well, it did delay its next-generation PlayStation product. A little later on down the road, Sony revealed plans to charge a pretty hefty price tag for a gaming system that may include a lot of bells and whistles, but many people have already noticed that it's so late to market that it's giving Microsoft's (Nasdaq: MSFT ) Xbox quite a head start.
Blunders like these make Sony's having lost the Walkman's reign in portable music to the iPod look tame by comparison.
I've long wondered whether Sony is simply too big to operate in an efficient manner, and whether there is something amiss with its corporate structure -- or maybe even its corporate culture -- that allows such blunders to happen. I wouldn't be surprised if many consumers are becoming leery of Sony at this point. The more we see events like this transpire -- some with financial ramifications -- the harder it will be for Sony to compete, much less grow. In my opinion, investors should beware.
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Alyce Lomax does not own shares of any of the companies mentioned.