Ericsson May Withdraw from SonyEricsson

Ericsson has confirmed to Bloomberg that is may withdraw from its SonyEricsson joint venture if the company does not see a significant improvement within the next three quarters. Ericsson and Sony have already invested US$250 million in the venture each, and it posted an unexpected loss in the second quarter of this year. Ericsson says that it will invest a maximum of US$500 million in the venture - and will terminate the joint venture if it needs further investments.

Ericsson's spokeswoman Aase Lindskog told Bloomberg; "We won't put more money into it if it doesn't begin to make products that fare better in the market." And she told Reuters, "We will not make the same mistake again. We will not put any more capital into the joint venture if it does not show results."

SonyEricsson has seen its market share slump since it announced the joint venture early last year, and it now ranked fifth on the worldwide market. This fall in market share could be partly attributable to time period used last year to develop new handsets for the joint venture, a hiatus that was then exploited by its competitors with new handsets and an increased marketing presence.

Much depends on the new MMS handsets and how quickly these pick up. When compared to Nokia, the SonyEricsson handsets do have some advantages in the arena of MMS, as the T68i (and new handsets due out shortly) support MMS animations, which is surprisingly missing from the Nokia range. With MMS animations almost certainly going to be shown off in pubs and clubs by the youth culture, the "backward" Nokia's could be perceived to be dated compared to the SonyEricsson handsets. That could deal a serious blow to Nokia's "street cred", and help SonyEricsson recapture some of the youth market.'"

Posted to the site on 2nd September 2002