Dell Battery Danger Stems From Manufacturing Defect

Dell Inc.'s (DELL) record-setting recall of 4.1 million notebook computer batteries raised safety concerns about the power source of countless electronic devices, but experts said the problem appears to stem from flaws in the production of the laptop batteries, not the underlying technology.

Customers began calling the company and surfing to a special Web site Tuesday to order replacements for the lithium-ion batteries, which could cause their Dell machines to overheat and even catch fire. The batteries were supplied to Dell by Japan's Sony Corp (SNE).

Lithium-ion batteries are not only used to power laptops, but also digital cameras, music players, cell phones and other gadgets.

• Click here to check whether your battery model may be among those recalled.

Dell, the world's largest PC maker, announced the recall Monday night with the Consumer Products Safety Commission. It was the largest electronics-related recall involving the federal agency.

The batteries were shipped in notebooks sold between April 1, 2004, and July 18 of this year. They were included in some models of Round Rock, Texas-based Dell's Latitude, Inspiron, XPS and Precision mobile workstation notebooks.

• Click here to see a photo of a Dell laptop exploding in Japan, and here to see the aftermath of a Dell notebook fire in Illinois.

Orders were being filled on a first-come, first-served basis, said spokesman Ira Williams. He couldn't estimate how long customers might have to wait. It could vary by the model of their notebook, he said.

Dell said it received more than 100,000 phone calls, 23 million Web site hits and took 77,000 orders by late in the day.

The replacements are coming from Sony and a handful of other battery manufacturers.

Rick Clancy, a Sony spokesman, said the company has "taken steps to address the situation ... to Dell's satisfaction."

He declined to elaborate on what the company has done to fix the problem.

Lithium has been replacing nickel-cadmium and other materials for batteries used in a range of electronic devices since the early 1990s. The smaller, lighter batteries produce more power to drive increasingly demanding gadgets, such as laptops with high-resolution screens.

Battery packs contain cells of rolled up metal strips. During the manufacturing process at a Sony factory in Japan, crimping the rolls left tiny shards of metal loose in the cells, and some of those shards caused batteries to short-circuit and overheat, according to Sony.

Roger Kay, an analyst with Endpoint Technologies Associates, called the situation "a nightmare for Sony" but said the recall wasn't likely to scare manufacturers away from using lithium-ion batteries.

"Well-made lithium-ion batteries are perfectly safe," he said. "This is a manufacturing problem and not an indictment of lithium-ion technology."

Still, there have been previous reports of problems with lithium-ion batteries. Last year, Apple Computer Inc. (AAPL) recalled batteries made by South Korea's LG Chem Ltd.

And in 2004, the Federal Aviation Administration banned shipments of lithium batteries from the cargo holds of passenger planes because of a potential fire hazard, when they're shipped in bulk. Passengers, however, are still allowed to carry laptops or cell phones on planes.

FAA spokeswoman Tammy Jones said the agency is continuing to review the possible hazard.

It was unclear whether Dell's problem would spread to other PC makers. Sony supplies battery cells for its own notebooks and those of other computer manufacturers.

The configuration of cells differs from one manufacturer to another, but the building blocks are the same, according to Sony.

Sony provides battery components for other computer makers, including Lenovo Group Ltd., which said it gets a "handful" of reports each year of overheated batteries but does not plan a recall.

Spokesman Bob Page said Lenovo's machines have other features, including software that disables the machine if it detects unsafe conditions.

Dell has been using Sony battery parts longer than other manufacturers, and Lenovo and others may eventually develop similar problems, Kay said.

Apple, which analysts say also uses Sony battery cells, said it was investigating the situation. Hewlett-Packard Co. (HPQ) said it does not use Sony batteries and was not affected by the recall. Fujitsu said it builds its own batteries.

Dell has not given an estimate for the recall's cost but said it won't materially affect the company's financial results, which suggested that Sony would bear most of the cost. Analysts' estimated the recall could run $200 million to $400 million.

Investors brushed aside the news, pushing up shares of both Dell and Sony in Tuesday trading.

Dell shares rose 84 cents or 5 percent, to close at $22.08 on the Nasdaq Stock Market, and Sony shares gained 62 cents to close at $45.43 on the New York Stock Exchange.

The bigger issue, analysts said, is the possible effect on Dell's and Sony's reputations.

Cindy Shaw, an analyst with Moors & Cabot, said the recall could steer consumers away from Dell at back-to-school time. She also said business customers might not be forgiving.

At lunchtime Tuesday, a handful of customers browsed through Dell's first store, in an upscale Dallas mall. Dale Topham, a Dallas resident who was picking up a repaired computer, said the recall wouldn't make him less likely to buy another Dell.

"I don't worry because they're trying to take care of it," he said.

Dell and Sony both ranked among the most trusted consumer technology companies, according to a 2005 survey by Forrester Research.

But Forrester analyst Ted Schadler said the recall could depress notebook sales to businesses if the fire hazard causes regulators to ban the machines from airplanes.