DoCoMo recalls 400,000 handsets

Analysts say the recall of 400,000 Sony handsets will only be a blow to DoCoMo's credibility, not its bottom line

By CNN's Kristie Lu Stout

TOKYO, Japan (CNN) -- Japan's leading mobile operator NTT DoCoMo announced that it will begin replacing defective "DoCoMo by Sony" mobile phones from Wednesday.

Over 400,000 Sony SO503i handsets had been sold before the recall. Sales of the handset were suspended when a glitch in the product's imaging software was discovered.

Analysts say the recall is a blow to DoCoMo's credibility, but maintain that it should have minimal impact on company earnings.

Minimal earnings impact

"I think the biggest impact is on DoCoMo's image of reliability," said Kate Lye, a Tokyo-based telecom analyst with UBS Warburg.

"But there should be minimal earnings impact."

Industry watchers say both DoCoMo and Sony, the handset manufacturer, would share the cost of the recall.

With the 400,000 handsets retailing at $164 (20,000 yen) each, Lye estimated that both companies would bear a total cost of $65.6 million (8 billion yen).

"And that would be insignificant to DoCoMo's earnings which is about 800 billion yen operating profit," Lye added.

Last month, the dominant mobile operator reported an operating profit for this financial year of $6.4 billion (777 billion yen).

According to DoCoMo, sales of the Sony handset would continue in late June with ample supply of bug-free versions already in stock.

DoCoMo's shares, hit by the general telecom malaise, lost 5.9 percent to close at 2.06 million yen on Tuesday. They were unchanged in Wednesday trading.