Sony Ericsson aims for top 3 with more models

By : |May 27, 2005 0



PARIS: Sony Ericsson, the world’s fifth-largest mobile phone
maker, aims to become a top-three player by expanding its low-end range, but
will stay away from ultra-cheap models, its president said on Thursday.

The Japanese-Swedish joint venture, which used to focus on advanced, more
expensive phones, has found that mobile operators want a complete line-up of
models from fewer suppliers, including cheap models starting at 75 euros ($95).

“We need to work with a broader portfolio,” Miles Flint said at the Reuters
Telecoms, Media and Technology Summit in Paris.

A broader line-up of models should help it to increase its global market
share from the current 5.5 percent.

“We are striving to find the breakthrough to find a higher level of market
share,” said Flint, who has been in his current role for about 12 months and has
boosted research and development efforts to expand the product portfolio.

Sony Ericsson launched only seven new models in 2004, well below its top five
rivals such as Nokia and Samsung Electronics, which launch dozens of new phones
a year, Flint said. He added that he would double the figure in 2005, and
increase it again in 2006.

“There’s not a magic number. But there has got to be more next year than
there was last year. There are still segments that we haven’t addressed yet. You
can look at different form factors, different price tiers and air interfaces,”
he said.

But he would not go back to North America with phones using the CDMA
standard, he said, because there were plenty of growth opportunities in the more
popular radio network technologies, such as GSM and third-generation networks.

TOP THREE

He declined to say when he aimed to become a top-three player, which would
require surpassing the likes of fast-growing Korean rivals Samsung and LG
Electronics, or the current leaders, No. 1 Nokia and No. 2 Motorola.

“There is clearly a time horizon, but I don’t know what it is,” he said.

To gain market share it would have to make more cheap phones, which provide
most of the volume and growth.

But Sony Ericsson would not join Motorola and Nokia in making phones for $50,
$40 or even less, he said, adding that his company was not big enough to get the
necessary advantages of scale and it would need a completely different
technological base to build such models.

Nor would growth come from acquisitions, and Sony Ericsson is not interested
in the ailing mobile unit from Siemens, which is up for sale. “It’s not an area
of activity for us,” he said.

Another challenge for mobile phone makers is a slow erosion of profit
margins, under pressure from low-cost rivals, but Flint did not expect that
mobile phones, the world’s single biggest consumer electronics segment, would
become as notoriously unprofitable as the overall consumer electronics industry,
with average margins of 2 percent.

ERODING MARGINS

“We see the migration of (photo) imaging to the phone and we’ve been at
forefront of that wave. We now see music migrating to the phone. We see TV and
video moving to the phone, payment services, and a whole variety of
applications. To pack all that into this is bloody difficult,” he said.

“I don’t see the same commoditisation as in the consumer electronics
industry,” Flint added.

Sony Ericsson expects mobile phone manufacturers will sell a total of 686
million units this year.

Although that is well below its rivals’ forecasts for 700 million to 740
million units, it far exceeds the annual volume of TV and PC sales, at about 190
million each.

Sony Ericsson became profitable in 2003, and despite a weak first quarter due
to an aeging line-up of models, which has since been addressed, Flint was
confident it would continue to receive the support of its parent companies.

“My perception is that both parents are quite proud of what the joint venture
has become,” he said.

Sony Ericsson is benefiting from joint ownership, he said, by getting first
and often exclusive access to technology and brands, evident in its Walkman
phone due in the third quarter.

“We always said we would steal (from them) with pride.”

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