TOKYO -- Sweden's Telefon AB L.M. Ericsson said it is in talks with Sony Corp. over merging the companies' mobile-phone businesses. The deal would lift Sony's mobile-phone unit, which has lagged behind its Japanese rivals, to a position among the world's top players.
If confirmed, this is a logical move. It allows Ericsson to offload its loss-making handset unit and focus on its more lucrative networks. The Swedes must now deliver on these promises, or investors will be sorely disappointed.
"We are talking with Sony, but nothing is decided yet," Ericsson spokeswoman Pia Gideon said.
An announcement of the deal could come within days, according to a person familiar with the companies' plans. Under the proposed agreement, the two companies would jointly develop, manufacture and market next-generation mobile phones.
A Sony-Ericsson tie-up would be the latest to link Japanese and European communications-equipment makers. Toshiba Corp. is jointly developing mobile phones that can send and receive video with Germany's Siemens AG. The deals are founded on the need to share the risk of developing expensive next-generation mobile phones.
Despite Sony's strong position in many consumer-electronics products, it has always struggled with the cellular handset business. After years of effort it was forced to pull out of the U.S. handset market in 1999. Over the past year it has channeled more investment into mobile devices, including a hand-held personal digital assistant that competes with Palm Inc.'s products.
Ericsson has also faced setbacks in its mobile-phone business. The world's No. 3 handset maker, it recently announced that losses are forcing it to outsource all handset production to a manufacturing specialist.
Todays WSJI
From Briefing.com
06:41 ET LM Ericsson (ERICY) 6.32: Sony Corp (SNE) and Ericsson are discussing the idea of folding their cell phone operations into a joint venture in Britain, reported Japanese television network NHK.
09:08 ET LM Ericsson (ERICY) 6.32: -- Update -- The Ericsson/Sony (SNE) joint venture talk (see 6:41 ET comment) is eliciting positive comments from brokerage firms; Bear Stearns' Ripple Effect views a JV as positive for ERICY because 1) Sony has consumer electronics' expertise, 2) limits ERICY's exposure to handsets, and 3) allow mngmt to focus on wireless infrastructure. Lehman Brothers also makes positive comments about the potential deal.
Jim |
