Whitebook Builders Profit From Notebook Battery Recall Fallout

Lenovo last week became the latest PC maker to fall victim to explosive problems with defective Sony battery cells, as the Raleigh, N.C.-based PC maker announced it was recalling more than 500,000 notebook batteries with packs made by Sony.

Dell and Toshiba, which earlier had announced their own callbacks of Sony batteries, each expanded the number of units involved. Dell is now recalling 4.2 million laptop batteries, while Toshiba is exchanging 830,000.

With news of the latest recalls breaking last week, system builders and solution providers say they've continued to see sales of whitebooks buoyed as problems mounted at their tier-one competitors.

Already Dell and Apple have launched full-blown recalls because of bad Sony battery cells, and Toshiba has begun enacting a voluntary battery exchange because of quality control issues from Sony batteries in some of its laptops.

Tom McGovern, president of TWM Systems, a Hopedale, Mass.-based VAR and system builder, said that with the drumbeat of bad-battery headlines involving tier-one laptops, his budget to market his own whitebooks has stayed the same.

At zero.

"We're not going to market that as their weakness. We don't need to. They're doing it all by themselves," McGovern said. TWM Systems has seen a 15 percent increase in sales of its whitebooks and white-box PCs over the past couple months, and McGovern said he attributes a large part of that to customers' concerns about the battery recalls.

"The [recalls] are very visible to customers. They prefer something that is configured and serviced by somebody local," McGovern said. "We've also got a number of clients who don't want to deal with the battery issue at all. We've picked up business handling the battery returns [for them]."

Most end users may not understand that there are few battery manufacturers worldwide, he said.

They're more concerned that if they have an issue, "they have our ear, and it's comforting to them."

For the past several weeks, since Round Rock, Texas-based Dell announced on Aug. 15 it was recalling 4.1 million notebook batteries with Sony cells, system builders have said they expected to see benefits from the emergence of fear, uncertainty and doubt surrounding tier-one notebook makers.

The Lenovo recall came little more than a week after reports that a ThinkPad T43 burst into flames at a Los Angeles airport requires a public safety response. Under terms of the recall, which was joined by IBM, Armonk, N.Y.—which sold its PC business to Lenovo last year—several models of ThinkPad notebooks, including those from its T Series, R Series and X Series would have batteries exchanged under Lenovo's replacement program.

The batteries were sold with, or separately for use with, those ThinkPad models sold between February 2005 and September 2006.

"We did confirm the incident at LAX, and we have confirmed that, yes, indeed, it was a Sony battery cell that was included in the notebook," said Ray Gorman, Lenovo's spokesman, just prior to the recall announcement. "Our No. 1 issue here is public safety. We will go forward in the best interests of public safety."

Expert Computers, a solution provider and systems builder based in Erie, Pa., also said his whitebook business is up 15 percent compared with last year. "It's hard to quantify if it's directly related to the battery recall, but a lot of people are bringing in their recalled notebooks," said Tim Klan, president of Expert Computers. "It is a little bit of a selling point."

Despite the involvement of Apple, Lenovo and Toshiba in Sony-related recalls, some in the channel believe Dell has remained a lightning rod for ill will over the issue.

Klan also believes that Dell, the market-share leader, is inadequately handling the battery recall.

"We've had customers waiting two weeks for a replacement. [Dell] wasn't ramped up with the proper stock in hand, and that's made them lose credibility with customers," Klan said. "Anybody can have a product recall, it's a matter of how you handle it."

Glenn Pubal, sales manager at Royal Business Equipment, a solution provider and system builder in Elyria, Ohio, keeps two news photos of exploding Dell notebooks up in his showroom. "I think it's effective. If someone comes in looking for notebooks, I say just look at these pictures," he said. "It's an issue people are aware of."

Royal Business Equipment recently started selling Lenovo ThinkPads, but leads with his own notebooks first, he said.

"We market [Lenovo] as this is the old IBM ThinkPad. People say it's nice, but still nobody's heard of them," Pubal said. "We can get [whitebooks] out the door for less than $900. That extra $100 is justifiable to a lot of people."