[bksvol-discuss] Dell Recall Stems From Production Flaw

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  • Date: Tue, 15 Aug 2006 19:25:05 -0700 (PDT)

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Dell Recall Stems From Production Flaw 

AP Business Writer

August 15, 2006, 10:05 PM EDT

DALLAS -- Dell Inc.'s record-setting recall of 4.1 million notebook computer 
batteries raised safety concerns about the power source of countless electronic 
devices, but experts said the problem appears to stem from flaws in the 
production of the laptop batteries, not the underlying technology. 

Customers began calling the company and surfing to a special Web site Tuesday 
to order replacements for the lithium-ion batteries that could cause their Dell 
machines to overheat and even catch fire. The batteries were supplied to Dell 
by Japan's Sony Corp. 

Lithium-ion batteries are not only used to power laptops, but also digital 
cameras, music players, cell phones and other gadgets. 

Dell, the world's largest PC maker, announced the recall Monday night with the 
Consumer Products Safety Commission. It was the largest electronics-related 
recall involving the federal agency. 

The batteries were shipped in notebooks sold between April 1, 2004, and July 18 
of this year. They were included in some models of Round Rock, Texas-based 
Dell's Latitude, Inspiron, XPS and Precision mobile workstation notebooks. 

Orders were being filled on a first-come, first-served basis, said spokesman 
Ira Williams. He couldn't estimate how long customers might have to wait. It 
could vary by the model of their notebook, he said. 

Dell said it received more than 100,000 phone calls, 23 million Web site hits 
and took 77,000 orders by late in the day. 

The replacements are coming from Sony and a handful of other battery 

Rick Clancy, a Sony spokesman, said the company has "taken steps to address the 
situation ... to Dell's satisfaction." He declined to elaborate on what the 
company has done to fix the problem. 

Lithium has been replacing nickel-cadmium and other materials for batteries 
used in a range of electronic devices since the early 1990s. The smaller, 
lighter batteries produce more power to drive increasingly demanding gadgets, 
such as laptops with high-resolution screens. 

Battery packs contain cells of rolled up metal strips. During the manufacturing 
process at a Sony factory in Japan, crimping the rolls left tiny shards of 
metal loose in the cells, and some of those shards caused batteries to 
short-circuit and overheat, according to Sony. 

Roger Kay, an analyst with Endpoint Technologies Associates, called the 
situation "a nightmare for Sony" but said the recall wasn't likely to scare 
manufacturers away from using lithium-ion batteries. 

"Well-made lithium-ion batteries are perfectly safe," he said. "This is a 
manufacturing problem and not an indictment of lithium-ion technology." 

Still, there have been previous reports of problems with lithium-ion batteries. 
Last year, Apple Computer Inc. recalled batteries made by South Korea's LG Chem 

And in 2004, the Federal Aviation Administration banned shipments of lithium 
batteries from the cargo holds of passenger planes because of a potential fire 
hazard, when they're shipped in bulk. Passengers, however, are still allowed to 
carry laptops or cell phones on planes. 

FAA spokeswoman Tammy Jones said the agency is continuing to review the 
possible hazard. 

It was unclear whether Dell's problem would spread to other PC makers. Sony 
supplies battery cells for its own notebooks and those of other computer 

The configuration of cells differs from one manufacturer to another, but the 
building blocks -- the cells, which resembled small rolled up sheets of metal 
-- are the same, according to Sony. 

Sony provides battery components for other computer makers, including Lenovo 
Group Ltd., which said it gets a "handful" of reports each year of overheated 
batteries but does not plan a recall. Spokesman Bob Page said Lenovo's machines 
have other features, including software that disables the machine if it detects 
unsafe conditions. 

Dell has been using Sony battery parts longer than other manufacturers, and 
Lenovo and others may eventually develop similar problems, Kay said. 

Apple, which analysts say also uses Sony battery cells, said it was 
investigating the situation. Hewlett-Packard Co. said it does not use Sony 
batteries and was not affected by the recall. Fujitsu said it builds its own 

Dell has not given an estimate for the recall's cost but said it won't 
materially affect the company's financial results, which suggested that Sony 
would bear most of the cost. Analysts' estimated the recall could run $200 
million to $400 million. 

Investors brushed aside the news, pushing up shares of both Dell and Sony in 
Tuesday trading. 

Dell shares rose 84 cents or 5 percent, to close at $22.08 on the Nasdaq Stock 
Market, and Sony shares gained 62 cents to close at $45.43 on the New York 
Stock Exchange. 

The bigger issue, analysts said, is the possible effect on Dell's and Sony's 

Cindy Shaw, an analyst with Moors & Cabot, said the recall could steer 
consumers away from Dell at back-to-school time. She also said business 
customers might not be forgiving. 

At lunchtime Tuesday, a handful of customers browsed through Dell's first 
store, in an upscale Dallas mall. Dale Topham, a Dallas resident who was 
picking up a repaired computer, said the recall wouldn't make him less likely 
to buy another Dell. 

"I don't worry because they're trying to take care of it," he said. 

Dell and Sony both ranked among the most trusted consumer technology companies, 
according to a 2005 survey by Forrester Research. 

But Forrester analyst Ted Schadler said the recall could depress notebook sales 
to businesses if the fire hazard causes regulators to ban the machines from 

* __ 

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