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The following information should allow you to understand the Sony
Ericsson merger in more detail.
==
The mobile telecommunications market is an arena of intense
competition. The merger between Sony and Ericsson was an attempt to
combine the strength of both companies to form a more effective global
competitor, especially against rivals Nokia and Motorola. The
horizontal merger has allowed the two companies to perform more
effectively in the world market.
SONY ERICSSON MOBILE COMMUNICATIONS
====================================
"Sony Ericsson Mobile Communications was established in 2001 by
telecommunications leader Ericsson and consumer electronics powerhouse
Sony Corporation. The company is equally owned by Ericsson and Sony."
The company "offers mobile multimedia consumer products for people who
appreciate the possibilities of powerful technology. By creating an
enticing brand and taking the lead in bringing new ways of using
multimedia communications while mobile, Sony Ericsson can create
compelling business opportunities for its operator customers."
"Sony Ericsson is responsible for product research, design and
development, as well as marketing sales, distribution and customer
services. The company's global management is based in London, has R&D
in Sweden, Japan, China, US and UK, and in total has approximately
3,500 employees around the world. President is Katsumi Ihara, and
Executive Vice President is Jan Wäreby."
"Sony Ericsson announced its first joint products in March 2002 and
now has a full product portfolio covering all target groups. Through
the combined strengths of Sony and Ericsson and by its strong
consumer-focused and applications-led strategy, the company is a
leading player in the mobile communications industry."
From Sony Ericsson Company Website:
http://www.sonyericsson.com/spg.jsp?page=GIS
THE MOTIVATION FOR THE MERGER - GLOBAL COMPETITION
==================================================
According to the Company Press Release:
--------------------------------------
"Ericsson and Sony to create world leader in mobile phones." (April 24
2001)
http://www.sonyericsson.com/spg.jsp?page=GIS (Scroll to bottom of
Press Releases)
"By combining the complementary strengths of Ericsson and Sony, the
new company is uniquely positioned to become a world leader in
telecommunications, as the industry moves rapidly toward Mobile
Internet," said Kurt Hellström, Ericsson President and CEO. "We are a
perfect match. Sony brings vast experience in consumer electronics and
entertainment - music, pictures and games - and Ericsson contributes
with our mobile technology lead and the world's largest customer base
among mobile operators. This is the ideal partnership for the growing
market of 3G and Mobile Internet."
Sony Corporation President and Chief Operating Officer Kunitake Ando
said: "The mobile phone industry is fast moving toward multi-media
broadband and poised to grow significantly in the years to come.
Millions of customers will require mobile handsets that can handle
rich content such as movies, pictures and games smoothly and
effortlessly, regardless of their location. Our collaboration with
Ericsson, the undisputed leader in the global telecommunications
industry, holds significance for us in creating an ubiquitous value
network that is always connected, on demand and interactive."
About Ericsson
Ericsson is shaping the future of Mobile and Broadband Internet
communications through its continuous technology leadership. Providing
innovative solutions in more than 140 countries, Ericsson is helping
to create the most powerful communication companies in the world.
About Sony Corporation
Sony Corporation is a leading manufacturer of audio, video, game,
communications and information technology products for the consumer
and professional markets. With its music, pictures, computer
entertainment and on-line businesses, Sony is uniquely positioned to
be a leading personal broadband entertainment company in the world.
Sony recorded consolidated annual sales of more than $63 billion for
the fiscal year ended March 31, 2000.
CNET.com ASIA Announces the Merger
----------------------------------
From "Sony, Ericsson unveil US$500m merger," by Fran Foo, CNET.com
(August 28, 2001)
http://asia.cnet.com/newstech/communications/0,39001141,38008998,00.htm
"Sony Ericsson Mobile Communications, a joint venture between Sony
Corp and Ericsson, will begin operations on October 1 with a
capitalization of US$250 million each, an Ericsson spokesperson said."
"Sony and Ericsson agreed to merge their mobile phone units in April.
In a statement today, Ericsson said that after "necessary approvals",
both companies will start to consolidate their respective operations."
"The joint venture will kick off with 3,500 employees in product,
marketing and sales. According to Ericsson Asia Pacific spokesperson
Arthur Huang, only the management team will be based in London. "The
rest of the structure will be announced when the operation is up and
running," he said."
"A new brand name for Sony Ericsson products will be unveiled later
this year, Huang said, adding that the offerings will focus on mobile
multimedia. The first joint venture product will be available in the
second half of 2002."
"The alliance has been seen as an attempt to resuscitate the
companies' languishing mobile phone units and a serious bid to rival
market leaders Nokia and Motorola."
"According to the International Data Corp (IDC), Nokia leads with a
30.8 percent market share globally, with Motorola a distant second at
14.6 percent. Ericsson is in third spot with 10 percent."
"Last year, 70 million cellular units were sold in the Asia Pacific
(excluding Japan). Nokia also leads the region with a 30.6 percent
market share and close to 21 million handsets sold. Sony, on the other
hand, was not one of the top five while Ericsson's market share dipped
7.4 percent in 2000 compared with the previous year, according to
IDC."
"But some analysts say it's too premature to predict the impact Sony
Ericsson will have on its competitors. "It's too early to tell if the
new company is a threat to Nokia," said Rachel Lo, IDC Asia Pacific
senior analyst for Communications Research."
"Sony Ericsson will be led by Sony's Katsumi Ihara as president and
Jan Wareby, a former Ericsson executive."
"On its operations in Asia Pacific and impending layoffs for
Ericsson's mobile phone units across the region, Huang said: "On
issues of staff structure, more information will be made available
after the joint venture is set up."
"Ericsson had earlier said that on a pro-forma basis, the combined
mobile phone businesses achieved sales of US$7.2 billion in 2000 with
approximately 50 million units sold."
THE MERGER IS COMPLETE
========================
From "Sony Ericsson Mobile Communications established today." Press
Release. (October 1 2001) http://www.sonyericsson.com/spg.jsp?page=GIS
"Sony Ericsson Mobile Communications, the joint venture between
Telefonaktiebolaget LM Ericsson and Sony Corporation, will today start
its operations, following final approvals from the European Commission
and other regulatory authorities. The new company will start its
operations today and is aiming to become the number one player in
mobile multimedia products within 5 years."
"I am proud to announce that we have received the final approvals and
we can start operations according to our initial plans", says Katsumi
Ihara, President of Sony Ericsson Mobile Communications. "We are 3,500
committed employees who are very much looking forward to creating a
great company and to launching our first products during next year",
says Mr Ihara.
"On August 28, Telefonaktiebolaget LM Ericsson and Sony Corporation
signed an agreement to set up Sony Ericsson Mobile Communications as
an equally owned joint venture. On September 11, the boards of both
companies announced that their respective boards have approved the
mobile phone joint venture. President of Sony Ericsson Mobile
Communications is Katsumi Ihara, and Executive Vice President and Head
of Sales & Marketing is Jan Wäreby."
"Sony Ericsson today also disclosed its new brand name and logo. The
new brand name is Sony Ericsson and is accompanied by a symbol in a
warm, organic green color. Together they represent the company's
vision and ambition and what Sony Ericsson does for its customers. A
downloadable version of the logo is available at
www.sonyericssonmobile.com/pressroom
"Sony Ericsson Mobile Communications AB offers mobile communications
products for people who appreciate the possibilities of powerful
technology. Established in 2001 by Telefonaktiebolaget LM Ericsson and
Sony Corporation, the joint venture continues to build on the success
of its two innovative parent companies. Sony Ericsson creates value
for its operator customers by bringing new ways of using multimedia
communications while mobile. The company's management is based in
London, and has 3,500 employees across the globe working on research,
development, design, sales, marketing, distribution and support."
HORIZONTAL AND VERTICAL MERGERS
================================
Definitions:
Horizontal merger - Merger of two or more companies with similar
product lines.
http://www.investorwords.com/cgi-bin/getword.cgi?2341
This type of merger best defines the Sony Ericsson company. Each
company has products which perform in the same segment - mobile
communications.
Vertical merger - Merger of a vendor and a customer.
http://www.investorwords.com/cgi-bin/getword.cgi?5243
This merger does NOT describe the Sony Ericcson merger, as neither
was a customer of the other.
(For further reference, see InvestorWords.com at
http://www.investorwords.com/ )
HOW IS THE COMPANY DOING?
========================
The 2003 Third Quarter report shows a bit of struggle.
http://www.ericsson.com/investors/sony_ericsson_q1_2003.shtml
"In the quarter ending March 31, 2003, Sony Ericsson Mobile
Communications (SEMC) shipped 5.4 million units, which is a 24 percent
decline from the fourth quarter, 2002 and a 7 percent decline compared
with the first quarter. Sales were 35 percent lower sequentially and
28 percent year over year due to lower volumes and price pressure. A
product mix shift created a lower average selling price (ASP). The
first quarter last year also benefited especially from the
introduction of two high-end models in the Japanese and European
markets."
"Although lower sales and ASP along with substantial spending on
product development and marketing created a loss for the quarter, SEMC
expects volumes and sales to increase during the second quarter with
the introduction of new models in the Japanese and GSM/GPRS markets.
SEMC still plans to start reporting profit later this year."
Q102 Q402 Q103
Units shipped (millions) 5.8 7.1 5.4
Sales (EUR m.) 1122 1235 805
Income before taxes (EUR m.) 0 -77 -113
Net Income (EUR m.) 3 -69 -104
As a 50:50 joint venture, Sony and Ericsson each report 50% of SEMC's
results as a joint venture accounted for under the equity method.
==
From "Sony Ericsson sales growing." Cellular Online (August 12, 2003)
http://www.cellular.co.za/news_2003/081203-sony_ericsson_sales_growing.htm
"Sony Ericsson reports strong increase in sales and shipments for its
two core business areas GSM and Japanese standards, and expects to be
profitable in the second half of 2003."
"The joint venture between Sony and Ericsson has announce a strong
increase in sales for the second quarter of 2003. Units shipped in the
quarter reached 6.7 million, which is 34% higher year-on-year and 23%
higher compared to the first quarter 2003."
"Net sales for the quarter were Euro 1.125 million, representing
year-on-year and sequential increases of 18% and 40%, respectively."
"In the areas of strategic focus and in the wake of successful product
launches, the GSM business posted 84% year-on-year growth in shipments
and Japanese standards shipments increased 45% year-on-year. This
business growth is attributable to a strengthened product offering
coupled with strongly improved supply and logistics performance."
COMPARISON OF WIRELESS HANDSET MARKET SHARE
===========================================
Sony Ericsson still has a long way to go before their wireless
handsets gain on the market share held by Nokia and Motorolla. There
has even been rumor of the company partneship dissolving, but that has
not yet been the case.
From "Q4 Wireless Handset Market: The Strong Get Stronger." Hot Topic.
The Aberdeen Group.
http://www.aberdeen.com/ab_company/hottopics/insider/ro020703.htm
"2003 will be a make-or-break year for Sony Ericsson........"
Nokia
=====
"Nokia's stated goal is to own 40% of the worldwide handset market,
and it's getting close. The #1 player shipped approximately 46 million
handsets and posted a market share of 39% in Q402. Heading into 2003,
the company has two major handset initiatives - Picture messaging and
Gaming.
Motorola
========
"Motorola continues to show signs of improvement both in terms of
market share and its product portfolio. In Q4, Motorola PCS posted
revenues of $3.3 billion and shipped over 22 million units to gain a
#2 market share position of 19%. These positive trends can be
attributed in part to renewed brand strength via the company's
"HelloMoto" ad campaign and operational improvements in the supply
chain."
"Looking forward, Motorola has developed an interesting technology
called haptics, which creates a personal surround-sound field based on
vibrations. Motorola owns the intellectual property and the technology
should help to differentiate their handsets, particularly in the youth
segment.
Sony Ericsson
==============
"Rumors that the Sony Ericsson partnership would dissolve surfaced
last year as the venture hemorrhaged market share and missed target
dates for new product launches. However, the two companies recently
contributed a combined $300 million to help keep the company afloat.
Sony Ericsson's current goal is to reach 10% market share, but there
is little precedent to suggest that this will happen in 2003."
ADDITIONAL INFORMATION
=======================
You may read through the Sony Ericsson Press Releases for the latest
information on new products and company highlights at
http://www.sonyericsson.com/spg.jsp?page=GIS
==========
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