Battery Recall Could Cost Dell About $246 Million

Sony Chairman and CEO Howard Stringer was delivering his keynote address at the Consumer Electronics Show in Las Vegas, and Dell Chairman Michael Dell joined him on stage to endorse Sony's Blu-ray optical drives. After Dell good-naturedly endorsed his company's displays and notebooks over competing products of Sony's, Stringer offered a self-deprecating response.

"Well, in fairness to Sony, I should say that if you want a really expensive laptop, buy a VAIO," he said.

Sony's close and strategic partnership with Dell, however, now could prove to be really expensive to both companies. After Dell, Round Rock, Texas, announced last week that it was recalling 4.1 million notebook batteries—in which manufacturing defects could lead to overheating and fires—both companies were scrambling to put the best face on a bad story.

A Dell spokeswoman said the debacle would not lead to any "material" financial impact on the company, despite the fact that the recall is expected to cost at least $246 million. (The U.S. Consumer Product and Safety Commission pegged the cost of each suspect battery at between $60 and $180.) A Sony spokesman, whose company was accepting full blame for defects in its battery cells, declined to confirm that his company would pay any amount.

Dell already has begun shipping the first replacement batteries to customers. However, one Dell executive, Digital Media Manager Lionel Menchaca, reported on the company's corporate Web log that lead times on shipments for most customers now would be about 20 days. In the first 15 hours after the announcement, the company fielded orders for 84,000 replacements.

Channel executives prepared for both chaos and opportunity.

Steve Seaforth, director of business development at Advanced Office Systems, a Cromwell, Conn.-based Dell reseller, said his company would be faced with helping customers sort out whether or not they needed replacement batteries.

"The alarming news is out. Now we've got to kind of identify who has the problem, who doesn't and who thinks they have the problem," he said. "It creates more chaos for us."

The faulty laptop batteries were found in Dell Inspiron, Latitude, Precision and XPS notebooks sold between April 2004 and July 2006. The dates also overlap with a separate Dell recall, announced late last year, for the replacement of 22,000 batteries due to overheating.