1. Product Recall  FDA Recall Date: August 24, 2006  Based upon a tendency of the lithium-ion batteries to overheat which poses a fire hazard to consumers.  Apple has received nine reports of batteries overheating, including two reports of minor burns from handling overheated computers and other reports of minor property damage. No serious injuries were reported.  The batteries become dangerous where particles in the battery cells come into contact with other parts of the battery cell, creating a short circuit. Sony said a battery would typically cut out if this occurred. However under certain circumstances it said a short circuit could lead to cells overheating and possibly flames, depending on the computer’s configuration.  http://www.cpsc.gov/CPSCPUB/PREREL/prhtml0 6/06245.html http://www.cpsc.gov/CPSCPUB/PREREL/prhtml0 6/06245.html Apple Announces Recall of Batteries Used in Previous iBook and PowerBook Computers Due To Fire Hazard Rechargeable, lithium-ion batteries with cells manufactured by Sony for certain previous iBook G4 and PowerBook G4 notebook computers only. The recalled lithium-ion batteries were used with the following computers: 12-inch iBook G4, 12-inch PowerBook G4 and 15-inch PowerBook G4. Consumers should remove the battery from the computer to view the model and serial numbers labeled on the bottom of the unit Battery Cell Manufacturer: Sony Energy Devices Corporation of Japan Recall affects 1.8 million Apple battery packs assembled in Japan, Taiwan and China ETM591 Andrew Dunagan 11/4/10

2. Management Issues Proactive/Reactionary measure - Apple recognized after receiving nine reports of batteries overheating causing minor burns in some cases and some minor property damage in others. Proactive since the recall was issued immediately. Apple advised consumers to stop using and remove the recalled batteries immediately, then to plug the laptops into the AC adapter until replacement received. Consumers were advised to contact Apple to arrange for a replacement battery, free of charge. Apple sent a replacement battery to the consumer as well as a postage-paid return envelope for the recalled battery. Second-largest computer/electronics recall in history. ETM591 Andrew Dunagan 11/4/10

3. Impact of Recall  Apple initiated the recall and suffered very minor reputation damage considering there was a similar recall a year earlier affecting the same computers and batteries but in this case manufactured by LG.  Apple stock was just slightly lower after the recall announcement.  Apple spokesman mentioned the recall would have “no material impact” on Apple’s finances.  Sony shares lost value after the announcement of the recall by Apple, a clear indication of reputation damage.  Sony said its recent recalls - 1.8 million batteries for Apple and 4.1 million for Dell announced last week - will cost the company between $172 million and $258 million.  Sony announce it has since introduced additional safeguards into its battery manufacturing process to address the problem.  No known legal consequences to date.  Korean Air prohibited the use of PowerBooks and iBooks in-flight citing the possibility that the computer batteries might explode. ETM591 Andrew Dunagan 11/4/10

4. References  Kapica, J. (2006, September 29). Will your laptop explode?. The Globe and Mail. Retrieved November 4, 2010, from www.theglobeandmail.com/news/technology/article845157.ecewww.theglobeandmail.com/news/technology/article845157.ece  Apple Battery Recall Official. (n.d.). Gizmodo, the Gadget Guide. Retrieved November 4, 2010, from http://gizmodo.com/196422/apple-battery-recall-officialhttp://gizmodo.com/196422/apple-battery-recall-official  Apple Recall of Batteries Used in Previous iBook and PowerBook Computers Due To Fire Hazard. (n.d.). CPSC Home Page. Retrieved November 4, 2010, from http://www.cpsc.gov/cpscpub/prerel/prhtml06/06245.html http://www.cpsc.gov/cpscpub/prerel/prhtml06/06245.html  Apple Recall of iBook and PowerBook Computer Batteries. (n.d.). CPSC Home Page. Retrieved November 4, 2010, from http://www.cpsc.gov/cpscpub/prerel/prhtml05/05179.html http://www.cpsc.gov/cpscpub/prerel/prhtml05/05179.html  Bolger, J. (n.d.). Sony shares slide on Apple battery recall - Times Online. The Times | UK News, World News and Opinion. Retrieved November 4, 2010, from http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article619573.ece http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article619573.ece  Kelley, R. (n.d.). Apple to recall 1.8 million notebook batteries - Aug. 24, 2006. Business, financial, personal finance news - CNNMoney.com. Retrieved November 4, 2010, from http://money.cnn.com/2006/08/24/technology/apple_recall/index.htm http://money.cnn.com/2006/08/24/technology/apple_recall/index.htm  Korean Air Bans Apple, Dell Computers on Board. (2006, September 6). Hankooki Times. Retrieved November 4, 2010, from http://times.hankooki.com/lpage/biz/200609/kt2006090517585411880.htm http://times.hankooki.com/lpage/biz/200609/kt2006090517585411880.htm ETM591 Andrew Dunagan 11/4/10