Ericsson confirmed on Tuesday that it was attempting to revitalise its mobile phone business by teaming up with Japanese consumer electronics giant Sony to create a new handset brand.
The two companies will merge their respective operations and form a new joint venture, called Sony Ericsson Mobile Communications, which will be based in London. The news comes after a difficult few months for Ericsson. It said on Friday that it was cutting 12,000 jobs worldwide after making a loss of over £330m in the first three months of this year.
Ericsson's share of the global mobile phone market has been falling in recent times. Industry experts have criticised the company for producing inferior handsets compared to market-leader Nokia, and Ericsson executives have claimed that Sony will provide complementary skills.
"We need a deeper understanding of consumer electronics, of entertainment, audio video and design. I don't think we could have found a better partner than Sony for this," said Ericsson's chief executive Kurt Hellstrom at a press conference on Tuesday.
Ericsson currently controls 10.7 percent of the mobile phone market, compared to Sony's 0.9 percent. Despite this difference, the new venture will be split 50:50. The two companies claim to be aiming for a 12 percent market share in the short to medium term.
Sony will contribute 1,000 employees to the new company, with 2,500 coming from Ericsson. Both companies are keen to emphasise that Sony Ericsson Mobile Communications will concentrate on designing new phones, and will not be concerned with manufacturing. Ericsson has already outsourced production at its two UK-based handset factories to Singapore-based Flextronics.
Sony Ericsson Mobile Communications will begin operations on 1st October this year.
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