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Dell Recalls 4.1 Million Laptop Batteries

By Priya George

Dell is offering free replacements for 4.1 million laptop batteries after reports that some have short-circuited and caught fire. Their owners are being urged to stop using the batteries immediately and return them to Dell.

The recall affects lithium-ion batteries that were sold on their own or with laptops between April 2004 and July this year. Although they carry the Dell brand label, Sony made them. Therefore, concerns have been raised that other computers using Sony batteries such as Apple's Powerbooks might also be affected. The faulty batteries were sold separately or included in some models of Dell Latitude, Inspiron, XPS and Dell Precision Mobile Workstation laptop computers as well.

"We believe the battery recall is mostly a PR issue that will need some attention in terms of customer service and brand management," said Arun Sharma, an analyst with UBS Equities. "The timing of the recall is unfortunate given recent consumer share losses. We expect Dell to continue to invest more in the customer experience in order to improve its image over time." According to Sharma, the financial impact to Dell is expected to be immaterial to the company's earnings. Analysts said they expect Sony to help pay for the recall.

A spokesman for Dell said, "In rare cases, a short-circuit could cause the battery to overheat, causing a risk of smoke and fire. It happens in rare cases but we opted to take this broad action immediately."

"The majority of affected customers will be notified by e-mail, letter or telephone, depending on their region," the spokesman added. "A recalled battery should be immediately removed from the computer system and, like any other battery, stored in a cool, dry location away from combustibles. "Customers can still use their system by removing the battery and using the AC adapter provided with their system."

"We feel that one more incident in the field would be too much. And so we're taking a very proactive stance, despite only a handful of incidents, to go and recall these batteries, to get them out of our customers' hands and get them up and running with a new battery as simply as possible," said Alex Gruzen, Dell Senior Vice President.

In a research note, Shope said Wall Street would be looking for Dell to offer further detail on any operational issues; the impact of more aggressive pricing on profit margins; and enterprise demand.

"The health of Dell's enterprise segment is also a key unknown at this time. We fear that the company's current weakness in corporate PCs may hamper its ability to cross-sell enterprise solutions, and if this did not occur in the second quarter, it could represent an incremental risk factor for coming quarters," wrote Shope.

In conclusion, the Consumer Product Safety Commission says consumers with affected laptops should only run the machines on a power cord.


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