Dell Inc.'s recall of 4.1 million laptop computer batteries came as embarrassing news to Sony, which supplied the problem batteries, but proved to be good news for rival Japanese electronics companies Sanyo and Matsushita, pushing the struggling companies' shares higher Wednesday.
Sony, Sanyo and Matsushita (MC), maker of Panasonic brand goods, are the three major Japanese producers of lithium-ion batteries, which are rechargeable and used in laptops, digital cameras, music players, cell phones and other gadgets.
Sony Corp. (SNE) in Tokyo said it was still calculating how much the incident will cost, but that it has promised to cooperate fully with Dell Inc. (DELL) in the largest recall of electronics-related products in U.S. history.
Worries about the cost burden sent Sony shares tumbling 1.15 percent in Tokyo to 5,150 yen ($44).
Sony has been trying to overhaul its electronics operations under Welsh-born Howard Stringer, the first foreigner to head the company — and fight doubts about whether the Tokyo-based manufacturer of the Walkman portable music player and PlayStation video-game machine will ever regain its former glory.
Goldman Sachs (GS) said the recall could hurt Sony's near-term earnings, although that would depend on how the cost of the recall is shared with Dell.
In a report earlier this week, Goldman Sachs calculated the possible cost for Sony, using past sales data, at about 39.4 billion yen ($340 million).
John Yang, equity analyst at Standard & Poor's in Tokyo, said the battery mishap, although an embarrassment for its image, wasn't likely to be overly negative for Sony in the long run.
What would really hurt Sony would be a problem in its planned game machine upgrade, the PlayStation 3, set for worldwide sale in November, or a glitch in its booming flat-panel TV business.
"If we look at the big picture, it's not really Sony's core business," he said of the batteries, adding that the recall is adding to doubts about Sony's quality control.
Sony, based in Tokyo, recorded a 32.3 billion yen ($278 million) profit during the fiscal first quarter on the back of strong sales of flat-panel TVs and digital cameras — a big improvement on the 7.3 billion yen loss posted in the same period last year.
"We are proceeding immediately to support this recall," Sony spokesman Takashi Uehara said, adding that Sony batteries powering Sony's Vaio laptops don't have the same problems.
Getting a boost from Sony's woes was Sanyo Electric Co., a major Japanese battery-maker. Sanyo shares climbed 2.16 percent to 237 yen ($2).
Sanyo officials were not available for comment Wednesday because the company was closed for a summer break.
The boost will be welcome as Sanyo shares have been languishing — losing about 40 percent in recent months — as the money-losing manufacturer struggles to restructure and reduce production costs.
In January, Sanyo got a much-needed capital boost from a group of investors led by Goldman Sachs Group Inc., which became the company's top shareholder and took over the nine-member board.
Shares of another rival, Matsushita Electric Industrial Co., which makes Panasonic brand products, jumped 2.71 percent to 2,460 yen ($21; euro16.50).
Like other Japanese electronics makers, battered by competition from cheaper Asian rivals, Matsushita has been overhauling its operations, cutting costs and focusing on profitable sectors, such as semiconductors, flat-panel TVs, auto electronics and products for the network-linked home.
But lithium-ion batteries are also a potential growth area, said Matsushita spokesman Akira Kadota. He declined to say whether Matsushita supplies Dell with the batteries.
Fujitsu Ltd., based in Tokyo, does not make lithium-ion batteries and was still checking to see whether any of its computers use the recalled Sony batteries, said Fujitsu spokesman Masao Sakamoto.
David Gibson, senior analyst at Macquarie Research Equities, said the recall will likely cost Sony somewhere between 25 billion yen and 35 billion yen ($215 million and $300 million), assuming a replacement cost of $50 per unit.
Gibson told Dow Jones Newswires that the damage to Sony is likely to be limited because the batteries make up only a fraction of its massive business.
The problematic lithium-ion batteries could cause the Dell machines to overheat and even catch fire.
Round Rock, Texas-based Dell, the world's largest PC maker, announced the recall Monday night.
Battery packs contain cells of rolled up metal strips. During production, crimping the rolls left tiny shards of metal loose in the cells, and some of those shards caused batteries to short-circuit, according to Sony.
The problem affecting the Dell computers lies in batteries manufactured by Sony Energy Devices Corp. based in Fukushima, north of Tokyo, Sony said.