I remember my first mobile phone well. It was an Ericsson A1018s, complete with an external aerial and a switchable dark green front cover. For many people of my generation, Ericsson is a name that ranks alongside Nokia as a titan of the mobile industry in the years before smartphones.
But in 2001, with its mobile hardware businesses struggling, Ericsson linked up with Sony to create the Sony Ericsson handset joint venture. The move appeared to work for a while, but with the arrival of smartphones and players such as Apple, HTC and Samsung, the fortunes of the JV faltered.
According to Gartner, Sony Ericsson was tenth in terms of global handset sales in the second quarter of 2011 with 7.3 million units sold, a 1.7 percent market share. This is a long way from the company that was once a top three handset maker.
Such has been the shift in the mobile device landscape that Ericsson recently pulled out of the sector completely, selling its 50 percent JV stake to Sony for US$1.05 billion due to “declining synergies in combining network and handset operations.”
Sony subsequently announced plans to drop the Ericsson branding completely in 2012 and focus on smartphones with its Android-powered Xperia line. It will phase out the feature phones it still sells during 2012.
Ericsson’s decision to leave the JV is unlikely to do the company much harm, as its main source of income is the production and installation of telecoms infrastructure, with mobile devices a secondary concern at best. The interesting question now is how the handset business will fare under the Sony brand.
While attached to Ericsson, Sony boosted its credentials as a mobile device maker and – at least initially – moved up a few rungs in the mobile device market. But does the Sony brand on its own have sufficient brand recognition in the mobile industry, especially in the US and Europe?
Sony is known for making TVs, stereos and the PlayStation, but consumers may be a little wary of the brand when it comes to choosing a mobile phone. Everyone knows Ericsson means mobile – but Sony? Not so much.
With the likes of Apple, Samsung and HTC making waves in the smartphone market and Nokia working hard to become relevant again with Windows Phone, the Ericsson brand will be notable by its absence. In contrast, Sony will be notable by its presence. With Sony Ericsson having been in decline for a number of years, it’s going to be tough for Sony alone to return the phone division to its previous heights.
However, things may not be as tough for Sony as they first appear. Take HTC. Until a few years ago the Taiwanese handset maker made operator-branded devices and was hardly known outside its home country. But when Android arrived, HTC came out from hiding and quickly became one of the biggest smartphone players around. And prior to the launch of the first iPhone, Apple had no presence in mobile. A lack of mobile heritage isn’t necessarily a bad thing.
Indeed, the loss of the Ericsson name in the mobile handset market could be seen as a natural evolution within the industry. Nokia, the once all-conquering mobile manufacturer, had to resort to an alliance with Microsoft in an effort to make it seem relevant again and halt its decline. Ericsson on the other hand, has decided it has other fish to fry.
Another factor in Sony’s favour is its electronics business. Like Samsung, Sony has other technology – TVs, the PlayStation 3 and tablet computers – that could be integrated with its mobile portfolio. Sony even said Ericsson’s exit from the JV provides “an opportunity to rapidly integrate smartphones into its broad array of network-connected consumer electronics devices – including tablets, televisions and personal computers.”
Sony will be technically strong too, through a continuing collaboration with the Swedish company – and access to its patents. So the disappearance of the Ericsson brand will be an interesting development to watch in 2012 and beyond. Sony will have to assert itself as a mobile brand in its own right, which will be a challenge, but by no means an impossible one.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members