Sony Considers Lowering Profit Forecast

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The Associated Press
Tuesday, October 17, 2006; 7:24 AM

TOKYO -- Plagued by battery recall problems, Sony Corp. said Tuesday it may lower its fiscal year earnings forecast _ even as it announced yet another recall.

Sony's earnings also could take a hit from a decision last month to slash the price in Japan for its next-generation game console PlayStation 3 _ a move that is likely to reduce sales because initial shipments are expected to be limited and sell out. The machines are set to go on sale in Japan and in the U.S. in November.

The Japanese electronics maker said in a statement it's looking into various factors to possibly lower its earnings projection. It said a decision has not yet been made, but it will disclose any revision quickly.

Sony had previously said it expects operating profit of 130 billion yen ($1 billion) for the fiscal year ending March 2007, down 43 percent from the previous fiscal year, and net profit of 130 billion yen, up 5 percent from fiscal 2005.

In the latest blow, Sony said Tuesday it plans to recall about 90,000 batteries used in some of its Vaio notebook computers sold in Japan and China, adding to an already massive global recall that has plagued the company.

Some 60,000 of those batteries will be recalled in Japan, said spokesman Takashi Uehara. The company has not received reports of any problems and is enacting the recall for its "customers' peace of mind," he said.

The batteries being recalled in Japan and China were used in 12 Vaio models, according to another company spokesman, Daichi Yamaguchi. The recall may eventually be expanded to include batteries used in Vaio computers sold in other markets around the world, he said.

Nearly 8 million Sony lithium-ion batteries have been recalled in recent weeks by practically every major laptop maker in the world, including Dell Inc. and Apple Computer Inc. The recalls come after the discovery that the batteries can short-circuit and cause some computers to overheat and burst into flames.

Sony initially said the battery recalls will cost the company between 20 billion yen ($168 million) and 30 billion yen ($252 million).

The cost for battery recalls may rise as more companies have recalled laptop batteries, including Japanese makers. Toshiba Corp. and Hitachi Ltd. said earlier this week they may demand damage compensation from Sony.

The woes are the latest troubles battering Sony as it tries to turn around its business after getting beaten by rivals on key consumer electronics products such as the MP3 digital music player and flat-panel TVs.

Nihon Keizai Shimbun, Japan's top business daily, reported Tuesday the Sony board will meet soon to make a decision on a forecast revision. Sony declined comment on the report.

Sony's PlayStation 3 has also run into manufacturing problems. Sony said last month the machine's launch in Europe will be delayed until March next year. Sony also lowered the Japan price for the PS3 by about 20 percent. Sony has not said how much the price cut and the European sales delay will cost.

Sony shares, which have fallen back after gaining 50 percent earlier this year, lost 1.8 percent to close in Tokyo at 4,790 yen ($40).

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© 2006 The Associated Press

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