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Wednesday, 4 July, 2001, 10:45 GMT 11:45 UK
Sony recalls 560,000 mobiles
The Sony C406S phone had been very popular
For the third time this year, mobile phones built by Sony have been recalled by the Japanese electronics and entertainment group.

The Sony SO503i was recalled in May due to software problems
This time, more than half a million Sony C406S folding phones have been recalled because a circuit problem caused their batteries to overheat.

The internet-ready phone, which features a colour screen, has been a success with Japanese consumers since its launch early this year.

"It's definitely yet another setback for Sony's handset business," said Credit Suisse First Boston telecom analyst Mark Berman.

Dented image

The latest recall does not involve reprogramming or replacing the handsets.

The tie-up with Ericsson brings a lot of engineering skill. Ericsson has great engineers and software people and Sony has the marketing know-how.

Mark Berman
telecom analyst
"The impact of the recall on earnings is insignificant for Sony. Plus, it's just the battery and not the software," said HSBC electronics analyst Hideki Watanabe.

But Sony's image has been severely dented by the incident which comes less than two months after Sony vowed to step up quality control of its handsets.

Competition is tough in the Japanese mobile phone market, the world's second largest, and consumers are quick to ditch unreliable providers.

"It's too bad. They are putting out very appealing consumer products," said Mr Berman.

Previous recalls

So far this year, more than a million Sony handsets have been recalled when the C406S models are included.

In May, KDDI recalled 126,000 Sony C101S phones and the mobile carrier NTT DoCoMo recalled 420,000 Sony SO503i phones due to software difficulties.

"It points to the difficulties associated with the complexity of the mobile phones," said Mr Watanabe.

Sony's image could recover as its recent tie-up with the Swedish mobile phone maker Ericsson moves forward, one analyst predicted.

"The tie-up with Ericsson brings a lot of engineering skill. Ericsson has great engineers and software people and Sony has the marketing know-how," Mr Berman said.

Endangered relationships

Japan's mobile phone makers work closely with the telecoms carriers to develop and sell new phones.

C406S batteries
The C406S batteries were overheating due to a problem with its circuitry
For Sony, yet another recall could cool relationships with these companies.

"The relationship with carriers, which is very important, is likely to take a slight blow here," added Mr Watanabe.

Sony's share price slid 2.26% on the news to 7,800 yen, the lowest close so far this year. KDDI's shares fell 2.15% to 545,000 yen.

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27 Apr 01 | Business
Sony heads for good year
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