Sony, to Sony Ericsson, and back to Sony again

Sony Ericsson first made its name in the competitive arena of mobile phones with
its unique and stylish range of music walkman phones. However, due to strong
opposition from firms, old and new, such as Apple’s iPhone and HTC’s iconic
Wildfire, the products from this joint venture between the Japanese and the Swedish
firms has somewhat become neglected. In October 2011, it was announced that Sony
would acquire the remaining 50% stake to make the business a subsidiary of Sony
Corporation. Now, as the once glorious ruler and king of music phones tries to win
back hearts and minds with the launch of the its latest smartphone, the Xperia S, let’s
look back at the firms’ turbulent history.

Ericsson originally started out as a telecommunications company in Sweden,
incorporated in 1918. Throughout the last decade of the 20th century, its presence has
graced its home city, renovating it into one of the Europe’s focal points in information
technology of the time. A pioneer of mobile phone technology in the mid-1990s,
it thrived on rising demands from all around the world, with its products being air-
mailed to customers in the top market! In spite of this, like many in the industry of
technology and especially in telecommunications, Ericsson suffered battered and
bruised knees after the burst of the dot-com bubble in the early 2000s. Even though
profit was restored by the end of 2000, that year didn’t turn out to be great for the
Swedish firm, as fire broke out at the factory. The Philips owned facility, a supplier
for Nokia as well, was the place where Ericsson solely got hold of the chips for
their devices. Having lost trust in the subcontractor’s capabilities, Nokia sourced its
materials from elsewhere. Ericsson, on the other hand, continued to put all their eggs
in one basket, and duly paid the price: a major shortage soon materialised, meaning
production was stalled. Huge losses were made and inevitably, market shares fell. To
add insult to injury, Nokia produced cheaper phones than its rivals. When asked why
Ericsson did not attempt to take inspiration from profitable designs of the Finnish
firm, which concentrated on producing affordable pieces of equipment of lesser
sophistication, a designer answered ‘If you want a phone that looks like a piece of
soap, then …’

Enter Sony, a new kid on the block with less than 1% shares in the mobile phones
market. The two firms embarked on a joint venture together in October 2001, with the
aim introducing a technology which seemed trivial to me when it was initially brought
in 2005, but is now one of the defining features of a mobile phone: photography. More
on that later…

Against expectations, market shares actually fell after the establishment of the
venture, though this was no different to other firms. A stock market valuation of the
world’s telecom carriers and suppliers had declined by $3.8 trillion from a peak of
$6.3 trillion in March 2000. Nevertheless, Sony Ericsson kept on going, injecting
more funds for R&D in its efforts to curb losses.

Sony Ericsson’s successful children together include the K750i and W800i. Launched

in 2005, the K-series phone packed a 2 megapixel camera while the W-series phone
was the first to bear the signature ‘walkman’ logo. Within a few years, new models
as well as developments of future successors of existing models were rolled off the
production line: T-series, Z-series, C-series (with Sony Cybershot technology) and
eventually my personal favourite, the X-series (more recent models are equipped with
advanced Bravia and Exmor R technology).

Even with incredible sales figures most of the time, Sony Ericsson was still financially
weak at the core. Apple’s unveiling of the iPhone in Q3 of 2007 saw Sony Ericsson’s
cash reserves deflate from €2.2bn to €599m. This meant LG Electronics overtook
its adversary in Q1 2008, when company’s profits fell significantly by 43% to
€133 million, with sales falling by 8% and market share falling from 9.4% to 7.9%.
Net profit crashed again by 97% in Q2 2008, leading to 2000 job losses. In Q3, profits
were around the same level, though sales were up due to the release of a newer model,
the C950.

The Sony Xperia S is the latest addition to the X-series. What’s more special is that
it’s the first Sony phone. With a 1.5Ghz dual-core processor and 1Gb of RAM, it
makes light work of normal tasks. But its party piece is not the ultra fast processing
speeds (most top end smartphones do that anyway), it is the ultra fast focusing speeds
of the 12MP rear camera and NFC (Near Field Communication) technology. The
latter is has been used for years, in Oyster Cards and contactless payment. Now, NFC
tags are used by Sony to activate some of a set of commands on the phone.

Industry experts are very excited about the Xperia S. Sony’s first phone is shaping up
to be a real hardware powerhouse, and its alluring design will turn heads without a
shadow of doubt. The display and camera are particularly worth of note. It’s coming
to the UK in March and I think it’ll certainly follow the booming sales figures of
previous phones, but I’m not too sure if this single product will change the financial
circumstances of Sony’s mobile phone division.

Contributed by Hin Cheong Wong

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