re: Ericsson-Sony
Nokia Bear, Per Lindberg, adds his 2 cents worth ...
>> Ericsson-Sony Handset Alliance Looms Over Market
Malcolm Spicer
Wireless Today
April 20, 2001
Ericsson [ERICY] and Sony [SNE] could be about to deal a potent wild card into the mobile phone sales game by forming an alliance to build handsets.
"I think it would make a major impact, especially for Sony," Bena Roberts, handset market researcher for high-tech industry research firm Current Analysis, told Wireless Today.
That's because Ericsson's strengths are its wireless phone brand and getting products to market, but Sony is stronger in developing technology, Roberts added.
"Ericsson always manages to get a product out fairly quickly - Sony never does," she said.
However, Stuart Jeffrey, a telecom equity analyst at HSBC, said Ericsson has more to learn from Sony.
"There are three key issues for Ericsson," Jeffrey said. "[One is] they have had poor manufacturing capability. Secondly, they have had poor design in terms of the aesthetics, as well as cost-efficient design of products. Thirdly, Ericsson has had a lack of understanding of where the market is going and how to keep up with those changes."
Speculation about the companies' partnering in the handset market prompted U.S. investors to send up Ericsson's shares 12.03 percent yesterday to $7.08 from a previous close of $6.32. Sony's shares, however, were down .17 percent to $76.81 from a previous close of $76.94.
The possibility of an Ericsson-Sony collaboration comes as handset vendors, including Audivox [VOXX], LG InfoComm, Samsung, Sendo and Siemens [SI],are angling to not only take market share away from Ericsson and Motorola [MOT], but also to cut into Nokia's[NOK] lead over the rest of the field.
All wireless phone sales expectations would be threatened by an Ericsson-Sony collaboration, Roberts said.
"If I were a manufacturer, I would be concerned," she said.
According to research by the Strategis Group, Ericsson had 10.2 percent worldwide market share in handset sales last year, while Sony had 1.4 percent.
In Western Europe, Sony accounted for 1 percent of wireless phone sales last year, according to research by Dataquest. Nokia led handset sales in Western Europe with 31.1 percent, followed by Siemens (16.7 percent), Alcatel [ALA] (11.3 percent) and Ericsson (10.4 percent).
Ericsson has sold all of its handset manufacturing operations, but continues to design phones that carry its brand. That is "one of the major problem areas of [its] handset business," said Peter Knox, a telecom equity analyst at Commerzbank Securities. "So, therefore, to bring in a large consumer-led, electronics-orientated business to the design and marketing side can only help."
Sweden-based Ericsson and Japan-based Sony both acknowledged yesterday they are discussing cooperating in the mobile phone space. "Nothing specific has been decided," Sony stated.
But something seems fated to develop. "The fact it is out there in the press probably means there is something reasonably substantive behind that," Knox said.
Roberts said she expects the companies to form a corporation with a limited life span specifically to develop and market mobile phones. Sony previously followed a similar plan in a handset alliance with Siemens.
Sony has focused its mobile phone business on Europe and Japan after slumping U.S. sales prompted it to begin pulling out of the U.S. market in July 1999. Working with Ericsson could help it re-enter the U.S. market, but increasing its market share in Europe and Japan would be a higher priority, Robert said.
"I think [re-entering the United States] is the end plan because Sony left quite abruptly," Robert added.
In addition, the alliance would not only boost Ericsson's presence in Europe, but also would lead to other Japanese companies building up handset market share in Europe, said Per Lindberg, a telecom equity analyst at Dresdner Kleinwort Wasserstein.
"A Japanese or Asian partner would be much better for Ericsson than a pan-European partner, just in terms of different skill-sets and markets," Lindberg said. "Sony can exploit Ericsson's infrastructure partners, and that is really the big implication for Nokia. The real impact is that the Japanese manufacturers will start to really be able to get access to the operators in Europe, and you will see much bigger and much more capable opposition to Nokia from the Japanese."
The Bottom Line
There's no question an Ericsson-Sony collaboration would rock mobile phone players' world. But while Ericsson's competitors are sure to maintain their best poker faces, they're also are likely to pull some aces out of their sleeves in response. <<
- Eric - |
