For richer, for poorer – but not forever
It’s turning out to be quite a week in the handset sector. Yesterday we had Nokia’s WP7 announcement and today Sony and Ericsson announced that they’re parting ways after ten years together in the handset market.
Whether or not the timing of these two announcements was a happy coincidence is known only to Sony and Ericsson themselves, but it was an unusual press conference. The invite didn’t come until just before half past seven Thursday morning – for a conference starting at ten the same day – and the whole affair was resolutely low-key, with Hans Vestberg and Howard Stringer on a temporary stage in a subterranean conference room in a hotel by Tower Bridge. This isn’t the way these things normally work.
The vast majority of handset industry analysts were at NokiaWorld for the second day so the audience at the SE do was thin. Is this what the two firms had in mind? It doesn’t require an Olympic leap of the imagination to reach this conclusion. For all the noise being made about ongoing collaboration, this event marked an end, not a beginning.
That said, it’s not necessarily a downbeat ending; not for Ericsson, anyway. Vestberg said that the time had now come when it no longer made sense for Ericsson to be a player in the front end of the handset market, which is why this decision had been taken. In truth, though, ownership of a handset vendor hasn’t made sense for Ericsson for a long while.
After the presentation Vestberg told me that Ericsson has not been looking to exit the JV for several years, as many have believed. It has always been the company’s focus, he said, to get Sony Ericsson to a position of relative health. It seems likely that Sony set targets that needed to be met before it would relieve Ericsson of the burden, for just over €1bn.
Vestberg conceded that the JV had endured more than its share of ups and downs, phases of profit and phases of loss. Over ten years, he pointed out in a bid to accentuate the positive, the firm has turned cumulative profit of €1.5bn. But how much has Ericsson sunk into it over that time? He said there had been “a lot of infusion of capital”.
Either way, Ericsson is better off out of it. There was an interesting moment towards the end of the Q&A. Vestberg said that he and Stringer were tired, having signed the agreement very early on Thursday morning. That, he said, was why they might be looking a little gloomy. A final question from the floor asked how Sony Ericsson (the brand stays in the short term) will differentiate itself from here on in. Vestberg smiled in what looked a lot like relief as he deferred that question to his opposite number. It’s not his problem any more.