Sony Battery Recall Costs $429 Million
When forecasting its profit margin for the year, Sony expected to take a hit from the upcoming PlayStation 3 launch; companies regularly lose money when making new hardware, so some financial hemorrhaging was to be expected. What Sony couldn't have foreseen, however, was the massive battery recall that ended up costing them a whopping $429 million and sent their bottom line screaming into the basement.
The cost to Sony's profits is obvious, but the more subtle damage was done to the company's image as a mainstay of consumer technology. The recall couldn't have come at a worse time for Sony, whose gaming division also posted a loss of $366 million as a result of PS3 prep. Even Sony's movie business failed to impress, adding another $129 million to the company's total losses.
While Sony's decision to reduce the number of PSPs shipped in fiscal 2006 makes a certain amount of sense in light of this financial news, its decision to lower the cost of the PS3 in Japan by 20% is curious. Such a slash will reduce what little profit the company was going to make on the hardware that would have almost certainly sold out at the full asking price.
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