Apple Recalls 1.8 Million Sony Laptop Batteries

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The New York Sun

Apple Computer Inc. (AAPL) announced a massive recall of laptop computer batteries Thursday, at a time when notebook sales are surging for the Cupertino, Calif., company and during the critical back-to-school shopping period.

The move, which mirrors a similar one done last week by Dell Inc.(DELL), isn’t seen slowing the company’s momentum in the laptop computer market, largely because the recall has to do with models that have been discontinued. Apple’s newer model come with chips from Intel Corp. (INTC).

“I don’t think it will hurt sales, since none of the notebooks was produced this year,” said Richard Doherty, an analyst at Envisioneering Group. Dell, on the other hand, had to recall products that were launched as recently as last month, the analyst said.

Apple said it plans to recall 1.1 million batteries in the U.S., plus 700,000 batteries sold in other countries. The batteries were made for Apple by a unit of Sony Corp. (SNE).

The move marks the second-largest recall on record in the computer and consumer-electronics market. Last week, Round Rock, Texas-based Dell said it planned to recall 4.1 million laptop computer batteries made by Sony, saying the batteries could possibly overheat and catch fire.

Sony said Thursday that it doesn’t expect any further recalls of battery packs using these batteries. The company added that it expects the overall cost of supporting the two recalls to total $172.1 million to $258.1 million.

Other computer makers seem to back Sony’s statement. Lenovo Group (0992.HK) spokesman Bob Page said Thursday that while the company does use Sony batteries in some of its notebooks, it uses different methods of charging and packaging the batteries and doesn’t have any plans for a recall at this time.

Meanwhile Gateway said in an email statement Thursday that “based on available information and our suppliers’ input, we do not believe our systems are at risk for the same malfunctions that caused our competitors to issue battery recalls.” The company said its notebook computers “use different battery cells than those implicated in our competitor’s recalls.”

Officials from other computer makers weren’t immediately available to comment Thursday; however, a Hewlett-Packard Co. (HPQ) spokesman said last week that he thought the issue was isolated to Dell.

Apple said Thursday that the lithium batteries in its 12-inch iBook G4, 12-inch PowerBook G4 and 15-inch Power-Book G4 could overheat, posing a fire hazard to consumers. None of Apple’s new laptop computers running Intel chips are part of the recall.Apple is giving consumers a replacement battery free of charge.

According to the Consumer Product Safety Commission, there have been nine reports of overheating, two reports of people receiving minor burn injuries and seven other reports of minor property damage caused by the batteries in Apple laptops.

Apple, which has been seeing strong sales of its Macintosh computers, sold 1.33 million units in its third quarter. Its share of the American retail market for laptops rose to 12% in June from 6% in January, according to Apple. Steve Dowling, a spokesman at Apple, said the company doesn’t anticipate the recall will have a material financial impact on Apple.

The recall announced Thursday is not the first time Apple has issued a battery recall. In May 2005, Apple issued a recall of about 128,000 units manufactured by LG Chem Ltd. (051910.SE) of South Korea.

Analysts said the recalls on the part of Dell and Apple aren’t likely to slow the pace of adoption of laptops by consumers, given choosing a laptop over a desktop computer is a lifestyle choice. What’s more, they say, if other PC makers come out with their own recalls, it levels the playing field for Apple and Dell.

“As long as the company addresses the problem and tried to solve the issue, consumers are relatively forgiving,”said Stephen Baker, an analyst at NPD Group, noting that the recall won’t have an effect on the back-to-school shopping season. He said in the short term it will be an aggravation and over the long term will cause minimal damage.

Investors seemed to agree. Apple shares dipped when the news broke at 1 p.m. ET but have since rebounded and more, gaining 51 cents, or 0.8%, on the day to $67.82.The volume is 22 million shares, below its average daily volume of 29.4 million shares.

Sony shares, though, are down 2.7%, or $1.19, to $43.24.

The New York Sun

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