Joint-ven­ture heaven

Re­cent surge as­cribed to mu­sic and cam­era phones

Finweek English Edition - - Communication & technology - FRIK ELS

PER­HAPS SONY ERIC­S­SON VER­SUS BenQ Siemens will one day be taught in MBA schools. The for­mer is a shin­ing ex­am­ple of how to build a suc­cess­ful joint ven­ture be­tween Euro­pean and Asian tech­nol­ogy com­pa­nies. In con­trast, the tie-up be­tween BenQ and Siemens is now his­tory, with the Euro­pean side of the ven­ture be­ing auc­tioned off piece­meal.

How­ever, it was never guar­an­teed that Sony Eric­s­son, formed in 2001, wouldn’t end up like the Tai­wanese-Ger­man part­ner­ship. On pa­per, Eric­s­son and Sony seemed a per­fect match (just like BenQ and Siemens did). Eric­s­son brought its vast ex­pe­ri­ence in telecom­mu­ni­ca­tion net­works and its cel­lu­lar tech­nol­ogy edge to the part­ner­ship while Sony was strong in con­sumer elec­tron­ics and me­dia through its film and mu­sic as­sets.

Af­ter its first year of op­er­a­tion, the Ja­panese-Swedish joint ven­ture made a loss of

292m and wouldn’t start mak­ing prof­its un­til third quar­ter 2003. Mar­ket share con­tin­ued to slip and the then Eric­s­son chief ex­ec­u­tive more than once threat­ened to pull the plug.

Martijn Lut­gerink, Sony Eric­s­son’s new south­ern Africa man­ag­ing di­rec­tor, says it was tough go­ing in the early days: “I’d get a full hour to present Sony Eric­s­son’s prod­uct lineup to op­er­a­tors. The prob­lem was that five years ago we had only one prod­uct (the T68). Be­fore long, I was talk­ing about the qual­i­ties of the pouch. And if the T61 hadn’t come along ( in late 2002) I don’t think the ven­ture would have sur­vived.”

To­day the com­pany has more than 75 prod­ucts in its port­fo­lio, in­clud­ing an ar­ray of ac­ces­sories un­matched by other hand­set man­u­fac­tur­ers. Prof­its now top 1bn; yearon-year sales growth of 60% was recorded and its share of the 1bn-a-year mo­bile phone mar­ket was up over 2% in the last quar­ter of 2006. (Dur­ing the quar­ter, BenQ Mo­bile dropped from 6th to 9th in global mar­ket share and it says it’ll now fo­cus on Asia.)

Lut­gerink says SonyEric­s­son’s next five-year ex­pan­sion plan is now be­ing im­ple­mented.

South Africa, which pre­vi­ously had a fourper­son sales of­fice, has been bumped up to a fully fledged re­gional head­quar­ters ser­vic­ing 37 coun­tries.

“Fifty mil­lion phones were sold in the re­gion in 2006, and we be­lieve this num­ber could dou­ble by 2010. “The as­pi­ra­tional na­ture of the South African mar­ket and the ap­petite for higher end prod­ucts are as­tound­ing,” says Lut­gerink. Sony Eric­s­son tar­gets the mid- to high-end of the mar­ket, but is also launch­ing en­trylevel phones more suited to the re­gion. “That said, I don’t think the com­pany is plan­ning to man­u­fac­ture a $25 hand­set.”

While the com­pany was placed fourth glob­ally in 2006 in terms of vol­ume, mea­sured in sales rev­enue, Sony Eric­s­son over­took Sam­sung in the fourth quar­ter of last year.

Most an­a­lysts as­cribe Sony Eric­s­son’s re­cent surge to its mu­sic and cam­era phones that lever­age Sony’s Walk­man (the iPod of the Eight­ies) and Cy­ber­shot brands. Phones with built-in cam­eras are no longer sim­ply point-and-shoot de­vices.

They come with pixel count and im­age qual­ity ap­proach­ing that of stand-alone de­vices.

Sony Eric­s­son’s latest Walk­man phone not only taps into the mo­bile mu­sic craze, but also the con­tin­u­ing trend to­wards slim phones: the W880 is as thin as a CD case, but with space for 900 songs.

Can eas­ily fill an hour to­day. Martijn Lut­gerink

GLOBAL CELL­PHONE SALES UP 21% IN 2006

Source: Gart­ner Dataquest (March 2007)

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