Recent surge ascribed to music and camera phones
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