Sony Ericsson is a joint venture established on October 3, 2001 by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony’s consumer electronics expertise with Ericsson’s technological leadership in the communications sector. Both companies have stopped making their own mobile phones.

The company’s global management is based in Hammersmith, London, and it has research & development teams in Sweden, Japan, China, Germany, the United States, India, Pakistan and the United Kingdom. By 2008, it was the fifth-largest mobile phone manufacturer in the world after Nokia, Samsung, LG and Motorola. The sales of products largely increased due to the launch of the Walkman and Cyber-shot series.

Troubles in Ericsson’s mobile phone business

In the United States, Ericsson partnered with General Electric in the early nineties, primarily to establish a US presence and brand recognition.

Ericsson had decided to source on chips for its phones from a single source, a Philips facility in New Mexico. In March 2000, a fire at the Philips factory contaminated the sterile facility. Philips assured Ericsson and Nokia (the other major customer of the facility) that production would be delayed by less than a week. When it became clear that production would actually be compromised for months, Ericsson was faced with a serious shortage. Nokia had already begun to obtain parts from alternative sources, but Ericsson’s position was much worse as both production of current models and the launch of new ones was held up.[5]

Ericsson, which had been in the cellular phone market for decades and was the world no. 3 cellular telephone handset maker was struggling with huge losses in spite of booming sales since 2000 due to this fire and its inability to produce cheaper phones like its competitor Nokia. To curtail the losses, it was thinking of outsourcing production to Asian companies that can produce the handset for lower costs.

Speculation had begun about a possible sale by Ericsson of its mobile phone division but the company’s president said that it had no plans to do that. “Mobile phones are really a core business for Ericsson. We wouldn’t be as successful (in networks) if we didn’t have phones”, he said.

Background of the joint venture

Sony was a marginal player in the worldwide cell phone market with a share of less than 1 percent in 2000. It was also struggling in this area with losses but wanted to focus more in this area. In April 2001, Sony confirmed that it was in talks with Ericsson for a possible collaboration in the handset business. This was soon after Toshiba and Siemens had announced plans in November 2000 to work together on handsets for 3G mobile networks, which was cancelled in 2001.

By August 2001, the two companies had finalized the terms of the merger announced in April. The company was to have an initial workforce of 3,500 employees.

Early troubles

In spite of having aimed to be profitable in its very first year, Ericsson’s market share actually fell and in August 2002, Ericsson said it would stop making mobile phones and end its partnership with Sony if the business continues to disappoint even as Sony said it was fully committed to the joint venture and wanted to make it a success. However, in January 2003, both companies said they would inject more money into the joint venture in a bid to stem the losses.

Sony Ericsson’s strategy was to release new models capable of digital photography as well as other multimedia capabilities such as downloading and viewing video clips and personal information management capabilities. To this end, it released several new models which had built-in digital camera and color screen which were novelties at that time. The high-end P800 which featured a built-in camera and PDA attributes was successful and helped in turning around. The joint venture, however, continued to make bigger losses in spite of booming sales. Thus, it kept postponing its target date for making a profit from its first year to 2002 to 2003 to second half of 2003.

It even failed in its mission of becoming the top seller of multimedia handsets and was in fifth-place and struggling in 2003.

Turnaround

Beginning of the turnaround

In June 2002, Sony Ericsson said it will stop making CDMA cellphones for the US market and will focus on GSM which was and remains the dominant technology. It also slashed jobs in research and development in USA and Germany. In October 2003, it posted its first quarterly profit but warned that falling prices on phones and competition would make it difficult to stay in black. Sony Ericsson’s recovery is credited to the success of the T610 model.

Following the success of its P800 phone, Sony Ericsson introduced the P900 at simultaneous events in Las Vegas and Beijing in October 2003. It was pegged as smaller, faster, simpler and more flexible than its predecessor.

In March 2004, Ericsson said it would try to block its rival Nokia from gaining control of Symbian, an industry consortium that makes operating software for smart phones.

In 2004, Sony Ericsson’s market share increased from 5.6 percent in the first quarter to 7 percent in the second quarter. In July 2004, Sony Ericsson unveiled the P910 communicator with its integrated thumbboard, broad e-mail support, quadruple memory and improved screen.

In February 2005, Sony Ericsson president Miles Flint announced at the 3GSM World Congress that Sony Ericsson will unveil a mobile phone-come-digital music player in the next month. It would be called the Walkman phone and would play music file formats such as MP3 and AAC.

Success with Walkman phones and beyond

On March 1, 2005, Sony Ericsson introduced the K750i with a 2 megapixel camera, as well as its platform mate, the W800i, the first of the highly successful Walkman phones capable of doing 30 hours of music playback and two low-end phones.

On May 1, 2005, Sony Ericsson agreed to become the global title sponsor for the WTA Tour in a deal worth 88 million US dollars over 6 years. The women’s pro tennis circuit was renamed the Sony Ericsson WTA Tour. Just over a month later on June 7, it announced sponsorship of West Indian batsmen Chris Gayle and Ramnaresh Sarwan.

In October 2005, Sony Ericsson presented the first mobile phone based on UIQ 3, the P990.

On January 2, 2007, Sony Ericsson announced in Stockholm that it will be having some of its mobile phones produced in India. It announced that its two outsourcing partners, Lextronic and Foxconn will be producing 10 million cellphones per year by 2009. CEO Miles Flint announced at a press conference held with India’s communications minister Dayanidhi Maran in Chennai that India was one of the fastest growing markets in the world and a priority market for Sony Ericsson with 105 million users of GSM mobile telephones.

On February 2, 2007, Sony Ericsson acquired UIQ Technology, a Swedish software company from Symbian Ltd.. UIQ will remain an independent company, Miles Flint announced.[6]

On October 15, 2007, Sony Ericsson announced on Symbian Smartphone Show that they will be selling half of its UIQ share to Motorola thus making UIQ technology owned by two large mobile phone companies.