Nokia warns on battery explosion risks

Tuesday

Nokia has announced that 46 million batteries used in its phones could overheat and result in explosion. Nokia has said it would replace them free to consumers while negotiating with battery maker Matsushita (6752.T) over who would bear the costs.

"Nokia has identified that in very rare cases the Nokia-branded BL-5C batteries...could potentially experience overheating initiated by a short circuit while charging, causing the battery to dislodge," it said in a statement on Tuesday.
The world`s top cellphone maker said about 100 such incidents had been reported globally but no serious injuries or property damage had been reported.
It said it was working closely with Matsushita Electric Industrial Co. Ltd., who made the batteries in question between December 2005 and November 2006, to investigate the problem.
Nokia said replacing millions of batteries would have some financial impact, but Matsushita would pay part of the costs.
Analyst Richard Windsor of Nomura estimated the cost to Nokia at a maximum of 100 million euros ($137 million). "Historically, when there`s been a problem of this nature the supplier has had to pay," he said.
Research firm Gartner said one such battery would cost around $4. Shares in Nokia were 0.9 percent lower at 22.42 euros by 6:46 a.m. EDT, helping nudge the DJ European technology index (.SX8P) down 0.5 percent.
Jyske Bank downgraded its rating on Nokia shares to "reduce" from "buy," saying every third Nokia user would now have to check their phone`s batteries. "I think this will hurt Nokia`s brand a lot and that`s the most precious asset Nokia has," Jyske analyst Soren Linde Nielsen said.
Nokia`s brand is valued at $33.7 billion, according to Interbrand, making it the world`s fifth most valued brand after Coca-Cola (KO.N), Microsoft (MSFT.O), IBM (IBM.N) and GE (GE.N).
The "BL-5C" is Nokia`s most widely used battery, powering among others low-end 1100 series phones and multimedia handsets N70 and N91. Several suppliers have made a total of more than 300 million of them for Nokia.

Nokia said it had issued a product advisory (http://www.nokia.com/batteryreplacement/en) to consumers based on preliminary findings of an ongoing investigation. v "By reacting swiftly and responsibly, and by being fully transparent, we believe that consumers will continue to view Nokia as a responsible and trustworthy brand," Robert Andersson, head of customer and market operations at Nokia told Reuters. The BL-5C batteries which are subject to the product advisory were used with the following Nokia models or separately as accessories:


Nokia 1100, Nokia 1100c, Nokia 1101, Nokia 1108, Nokia 1110, Nokia 1112, Nokia 1255, Nokia 1315, Nokia 1600, Nokia 2112, Nokia 2118, Nokia 2255, Nokia 2272, Nokia 2275, Nokia 2300, Nokia 2300c, Nokia 2310, Nokia 2355, Nokia 2600, Nokia 2610, Nokia 2610b, Nokia 2626, Nokia 3100, Nokia 3105, Nokia 3120, Nokia 3125, Nokia 6030, Nokia 6085, Nokia 6086, Nokia 6108, Nokia 6175i, Nokia 6178i, Nokia 6230, Nokia 6230i, Nokia 6270, Nokia 6600, Nokia 6620, Nokia 6630, Nokia 6631, Nokia 6670, Nokia 6680, Nokia 6681, Nokia 6682, Nokia 6820, Nokia 6822, Nokia 7610, Nokia N70, Nokia N71, Nokia N72, Nokia N91, Nokia E50, Nokia E60



Matsushita said there had been a rare problem in the manufacturing process rather than in the design of the batteries. It said the effect on its earnings was uncertain.

"We are still in discussion with Nokia about how to divide the replacement cost," said Matsushita spokesman Akira Kadota.

Marianne Holmlund, spokeswoman for Nokia, said in similar cases in the car industry less than half of consumers eligible for replacement had used the option. v In 2003, a Belgian consumer organization said some Nokia batteries had a short circuit risk, but the Finnish firm denied those claims and said media reports of exploding phone batteries were all related to counterfeits.

Last year, Sony Corp (6758.T) was hit by hefty costs to recall 9.6 million laptop PC batteries which could catch fire from overheating.

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