Cell Phone Talk

Electronic News, April 23, 2001

SWEDEN'S ERICSSON INC. and Tokyo-based Sony Corp. have surprised the mobile phone industry by confirming they are in talks to possibly combine some aspects of their separate mobile phone handset efforts. The two companies have not confirmed reports that a full merger of their handset businesses is in the cards, but they have said, in separate statements, that both companies are in talks about a potential collaboration in the mobile phone handset business, but nothing specific has been decided.

Even this has been enough to trigger speculation about Ericsson's future plans for its problematic handset business. One report suggests the deal will be a complete merger of Ericsson's handset business in a joint-venture company based in the United Kingdom. Ericsson is one of Europe's largest handsets companies and a leading developer of GSM mobile phones. This could be of value to Sony (nyse: SNE), which is looking to expand its own handset business outside of its home markets in Japan. Earlier this month, Ericsson a nnounced it was halting mobile phone manufacturing operations in the United Kingdom as a result of its continuing problems in the mobile phone handset market. But the company's mobile network business remains strong. The move is part of Ericsson's comprehensive efficiency program, which is expected to reduce annual costs by about $2 billion starting in 2002. Ericsson will also cut 2,100 jobs at its Swedish factories in Kumla and Linkoping, and a recruitment freeze has been introduced company-wide. Also, the firm indicated on Friday that further worldwide streamlining could affect as many as 10,000 more employees, more than half outside Sweden, by the end of the year.