Sony Ericsson coupling on the rocks?

26 Nov 2002

A question mark hangs over the future of the Sony Ericsson Mobile Communications joint venture today, following the release of disastrous third quarter handset sales figures.

These show the merger sold only five million mobile phones globally, compared with more than 8.5 million sold by the two before they merged.

The venture’s market share also fell to 4.8pc from an estimated 8.8pc.

The figures are below break-even levels and the two companies are now in talks on injecting more capital into the ailing alliance.

It has been reported that Ericsson may be considering stemming financial support if the venture does not become more profitable.

Sony spokesman Rei Sakaguchi said that the two were in talks about additional support.

Chief financial officer at Ericsson, Sten Fornell, yesterday said that the company is planning to raise capital for the venture by the first quarter of next year. However, he also said Ericsson may discontinue financing the venture, capitalised at US$500m unless it turns profitable.

In August, Sony Ericsson was the only one of the big five mobile companies to see its market share fall, sending Ericsson’s shares down 3pc to 6.5 Swedish Kroner.

Analysts are now warning that unless the alliance starts competing with more successful new products, the future does not look good.

News of the talks comes against a backdrop of a rise of 7.8pc in global mobile phone sales in the third quarter with market-leader Nokia’s worldwide market share growing to 35.9pc in the same quarter.

According to Gartner Dataquest, Sony Ericsson’s survival will depend on getting a full range of products to market by mid-2003 and getting the designs and pricing right and also needs to continue to exploit the Sony and Ericsson brands and weld them into one.

The 50-50 partnership between the two companies is barely a year old.

By Suzanne Byrne