Sony and Ericsson are reportedly preparing for the possibility of having to secure new financing at their struggling handset joint venture, with analysts speculating each could have to make a capital injection of EUR500 million before the end of the year. A Financial Times (FT) report claims that Japan’s Sony and Sweden’s Ericsson are considering a capital injection, or acting as guarantors on a loan for Sony Ericsson, to strengthen the joint venture’s balance sheet.

The venture is burning up cash as it runs up losses. Last month the company reported a first-quarter pretax loss of EUR358 million after sales dropped 36 percent from the year earlier. A 35 percent fall in handset shipments saw its market share plunge to 5.9 percent, ranking it as the fifth-largest global handset vendor. According to the FT article, Sony Ericsson’s president, Dick Komiyama, now admits his target for the group to become the world’s third-largest handset maker by 2011 might not be met until 2012. Last month Komiyama said he was confident of turning the company around and returning to profitability with the launch of new products. Sony Ericsson is hoping to begin selling at least two new smartphones by the end of this year – a market it has failed to break into – and a third early in 2010, using a variety of operating systems such as Symbian, Android and Windows Mobile. The company recently announced the loss of another 2,000 jobs as it targets a further annual operating expense reduction of EUR400 million, to be completed by mid-2010.