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Recalling 9.6 million batteries could have that effect on a company's bottom line

Those who have been following the news know that Sony has seen better days. Sony revealed to investors that net income for the year will decline 35 percent to 80 billion yen (US$675 million) from a year earlier, great short of the July forecast of 130 billion yen. Operating profit will fall 62 percent to 50 billion yen (US$420.6 million) this fiscal year, while the sales forecast was kept at 8.23 trillion yen (US$69.2 billion).

Reasons cited for the dive in profits are fairly obvious. Sony CFO Nobuyuki Oneda said in this mini report that a total of 9.6 million Sony-made PC batteries which were found in Dell, Lenovo, Apple, Toshiba, Matsushita/Panasonic, Fujitsu, Sharp and Sony's own notebooks could be subject to the company's global recall. Oneda said replacing the cells will cost 51 billion yen (US$429 million).

"The cost of the recall is our best estimate," Nobuyuki Oneda told reporters. "It may rise or fall."

Other reasons behind Sony's big financial revisions came from PlayStation 3. Sony announced at the Tokyo Game Show that the 20GB variant of the PlayStation 3 would receive a 20 percent price cut even before it hit stores and that it would include an HDMI connection that was previously reserved for the more expensive 60GB version. While this was good news for consumers, to investors it meant a more costly machine to produce. PlayStation 3 sales projections were also cutback due to the delay of the European launch.

Read more about it in this Reuters article.



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RE: Of course they leave out...
By Trisped on 10/23/2006 3:58:58 PM , Rating: 2
Yeah, that wasn't too clear. What I meant was that since they were only shipping 500,000 units they would only lose money on that many units (if it costs them $250 on top of what they charge, then they lose 250x500,000 instead of 250x1,000,000 which is twice as much loss). While I think they are losing less then $250 in hardware costs per console, I think it is still more then they make on the sale of 3-4 games.

Also, since they don't have many consoles out, game sales will suffer. It is like having 32 tires to put on 2 cars. You can use 8 at a time, but the other 24 are just taking up shelf space.


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