Sony Corp and Sweden's Ericsson AB said they may join to develop and sell mobile phones, a move which would link the third-largest handset maker with Sony's push to tie consumer electronics to the Internet.
An alliance would boost their combined market share to about 12 percent, third behind Nokia Oyj's 31 percent and Motorola Inc's 15 percent. Sony spokesman Shigenori Yoshida declined to provide more details than Sony's confirmation of the talks in a statement faxed to news organizations. The statement was in response to a news report broadcast on NHK outlining the talks.
The venture may provide Sony the market share needed to make returns on its investment in phones that play music, access the Internet and play games. Phones taking advantage of high-speed networks may help reverse the fortunes of Ericsson's handset business. Ericsson in January outsourced its production to other manufacturers.
"Cooperation has merits on both sides," said Hiroyuki Masuko, an analyst at Daiwa Institute of Research Ltd. "While Sony is trying to expand globally, it can count on Ericsson's development ability and sales channels. Ericsson can use know-how from Sony, which has been developing and selling feature-laden handsets in Japan."
While Sony doesn't rank among the 10 biggest handset makers, it's developed mobile phones into which users can insert memory cards storing music. The music player handsets are sold through NTT DoCoMo Inc and KDDI Corp, Japan's biggest and second-biggest mobile phone operators.
The maker of the PlayStation series of video-game consoles has also developed mobile phones compatible with Sun Microsystems Inc's Java programming language. Users of Java-equipped handsets can play video games on a mobile phone's tiny screen.
The two companies will combine their mobile phone operations into a UK-based joint venture, the NHK report said earlier today, citing people familiar with the situation.
Ericsson spokeswoman Pia Gideon, who confirmed talks were underway, declined to give any further details on the nature of the talks or when the companies expect to reach an agreement.
A tie up would come as Sony tries to expand its mobile phone operations. The company separated the business from its mobile devices unit on April 1, establishing it as an internal company called Digital Telecommunication Network Company.
The Japanese maker's share of the global handset market was estimated at 1.8 percent last year, according to Fuji Chimera Research Institute, a Japanese researcher. Ericsson had 10 percent of the market in 2000, according to Dataquest Inc, a unit of market researcher Gartner Group.
Ericsson sold 43.3 million phones last year, a 38 percent increase from 1999, according to the company. Sales rose at a slower pace, 21 percent, because of declining prices. The company's handset business accounts for about a fifth of sales.
Sony shipped about 5 million mobile phones in the year ended March, according to an estimate by Mitsunobu Tsuruo, an analyst at Nomura Securities Co.
The company's new mobile phone unit is headed by 50-year-old Katsumi Ihara, who once led Sony's mobile devices division, called the Personal IT Network Company. Before the reorganization, Ihara's division was responsible for Sony's digital cameras, Vaio notebook computers and Clie handheld organizers, in addition to mobile phones.
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