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Ericsson wobbles (big time) over Sony Ericsson

Hates heat, prepares to flee kitchen

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Ericsson today confirmed that it will pull out of funding Sony Ericsson, its mobile handset JV with Sony, unless business picks up.

Spokeswoman Aase Lindskog told Bloomberg; "We won't put more money into it if it doesn't begin to make products that fare better in the market." And if that isn't clear enough, she told Reuters: "We will not make the same mistake again. We will not put any more capital into the joint venture if it does not show results."

Ericsson is giving the JV two or three quarters grace to pull up its socks, she said.

And if it doesn't what will Sony do then? Expect a statement RSN, confirming the Japanese giant's continued commitment to handsets, whatever Ericcson does.

Ericsson is in a bad shape: the Swedish telecoms equipment maker is dotting i's and crossing t's on a $3.2bn share sale, designed to see the company through to safety while it navigates its way through deep cost-cutting waters.

Once upon a time, Ericsson was the world's third biggest mobile phone maker. Life was good, until Nokia got fashionable, and consumers stayed away in droves from Ericsson's box-like makers.

Then it got into financial difficulty, as business for its back-end products for telcos dried up, and sales falling for its handsets. So it in January 2001, it outsourced handset production to sundry companies, cutting 11,000 jobs in consumer manufacture in the process. This year the company has announced 25,000 job losses, taking the headcount down to 65,000 by the end of the year. And today, it announced that it was to outsource 4,000 IT department jobs, although not to whom, Bloomberg reports.

Late last year, Ericcson brought on board Sony as a JV partner for the handsets, revamped the range. The tie-in hasn't been a huge success so far : the combo is now the world's fifth biggest handset maker, falling behind Siemens and Samsung (Nokia and Motorola are the traditional top two).

According to Gartner Dataquest, Sony Ericsson unit shipments have fallen 30 per cent year, with combined market share slipping from 7.7 per cent (as separate entities) last year, to 5.3 per cent in 2002. ®

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