The formation of Sony Ericsson
Sony Ericsson, the mobile telephone company formed by Ericsson and Sony in 2001, was born of two, coincidental, serious crises.
The first concerned Ericsson’s mobile telephone operations. With its roots as far back as the 1930s, the company became a major player as late as the mid-1990s when mobile telephone use took off. In just a few years, Ericsson managed to become the world leader with a 17 % share of sales, an unexpected success for the huge system specialist whose foremost skills to that point had been selling to telephone administrations and other operators. As late as 1993 the company had only sold 800,000 phones. By 1999, that number had reached 32 million! At top market, telephones were airmailed to customers in Europe.
However, the first external signs that the success would be short-lived appeared in the summer semi-annual report 1998 when Sven-Christer Nilsson, who had just been appointed CEO, was forced to report on slower invoicing and price press. The demand on the rapidly growing market was shifting to cheaper, less advanced models. The competition in the form of the Finnish company Nokia grew apace based on its stronger eye for design, market segmentation and efficient production. To top it off, Ericsson had begun to experience technical problems with its telephones.
For the next three years the company would be forced to admit to a number of problems and unexpected events, ranging from problems with circuits and new model delays to a fire at a subcontractor and lack of back-up systems. Still, the largest problem was probably the lack of skills with consumer products most clearly shown in the legendary answer to the question of why the Swedes did not try to imitate the highly successful Finnish telephone design: “If you want a phone that looks like a piece of soap, then …” In 2000 the operation was forced to report the frightening loss of 24 thousand million SEK, a sum that included allocations for restructuring.
By this time the telecom crisis, the other, large crisis, had begun to affect mobile telephone sales. This one was bottomless, caused as it was by extreme, stock market expectations on the new 3G technology for mobile systems. Expressions of this included the fantastic prices tele-operators were willing to pay for 3G licenses at the auctions held at the time by a number of countries. Ericsson was affected along with the others when the new mobile computer systems failed to deliver as promised and the operators suddenly were broke
April 24, 2001, saw the announcement that Ericsson was merging its mobile telephone operations with Japan’s Sony, forming Sony Ericsson with each company owning 50 %. The Japanese electronics giant was to contribute its know-how in design and consumer sales that Ericsson had not been able to acquire. Sony had been mentioned as a possible partner as early as 1998 when Sven-Christer Nilsson had discussed Ericsson’s adaptations to all the new possibilities with the Internet.
The new, mutual company was headquartered in London. Ericsson kept hold of platform production and the basic mobile telephone technology. In October of that year most of the mobile telephone operation had been transferred, but only after dramatic personnel cutbacks. Thus the new company began operations with some 4,000 employees. The manufacture of Ericsson’s mobile telephones, already mostly subcontracted, disappeared for good from Sweden in 2003.
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