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Sony, Ericsson create 800lb phone gorilla

About the weight of a 3G handset?

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Sony and Ericsson effectively pooled their mobile phone operations yesterday, creating a new joint company to handle the venture.

This involves 2500 staff from Ericsson's phone division joining 1500 from Sony, with new multimedia phones promised for late next year.

The new joint company, imaginatively named Sony Ericsson Mobile Communications, will be based in London and will officially begin operations on 1 October.

Although most of the instant reaction has focussed on the cash pile that Sony brings to ailing Ericsson, Sony's arrival has effectively created a new 800lb gorilla. With Motorola still preoccupied by its own slash-and-burn re-organisation, the new venture emerges as the largest competitor to Nokia.

Sony only has one per cent of the 2G handset business, but has been spending heavily to catch-up, and last year signed up to the Symbian venture to create a common OS platform for advanced mobile phones, that Ericsson helped create in 1998.

Ericsson's Mobile Technology Platform will continue as an R&D unit, although what it can provide that SEMC can't remains to be seen.

Nomura analyst Keith Woolcock thought the venture could cure Ericsson's biggest recent problem: consumer marketing. "The phones are not attractive - no one wants to buy them," he told us. "Sony has all the right consumer marketing skills."

Except one, perhaps.

Sony's interest in multimedia devices is obvious, owning as it does content producers such as movie studios and record companies, but its track record of producing open playback devices is more questionable. With the Napster genie out of the bottle, this is clearly what the market wants right now, and trading audio looks like a a natural driver for consumer adoption of 2.5G and 3G networks. But Sony has gone out of its way to ensure its content production interests aren't damaged by its playback devices, and is not only cagey about MP3, but downright antagonistic.

"We will firewall Napster at source - we will block it at your cable company, we will block it at your phone company [our emphasis], we will firewall it at your PC... These strategies are being aggressively pursued because there is simply too much at stake," said Sony VP Steve Heckler [sic] last year.

So clearly Sony thinks its in its own interest to trap the multimedia content that could make 3G a success inside Sony devices, much as Microsoft wants to trap it inside its own WMF format, inside Windows PCs.

Sony has nibbled at other parts of the convergence pie: its iMode phones can be used to hold and swap PlayStation 2 games scores in Japan, but 3G and home audio is the major prize. How ironic then, that Sony's arrival into the multimedia phone game could drive adoption of cellular data as much as it could kill it. If Nokia doesn't see an opportunity here, we'd be very surprised. ®

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