Background
On 17 March 2000, a ten minutes fire in a fabrication line of the Royal Philips Electronics radio frequency chip manufacturing plant in Albuquerque, New Mexico, caused supply chain disruption for many companies. Among them Nokia and Ericsson were two companies which faced severe component shortage. 40% of the capacity of the burnt factory was dedicated to Nokia and Ericsson.
Although Philips estimated that restoring the factory would take a week and assured top managers of both companies that their orders were in priority for Philips but they could not manage to start the normal operation in the facility months after that. Nokia found some alternative suppliers and could manage the crisis but the story of Ericsson was completely different.
Ericsson did not react immediately to the crisis. Top managers trusted Philips vows, neglected the situation and faced sever component shortage consequently. They could not develop new models or even produce their current models.
Six months after that the struggling mobile phone division caused $167 million loss for the whole company. In July 2000 Ericsson started negotiation with Sony to merge their mobile phone business. The estimation was that Sony which was one of the leading companies in the consumer electronics sector can provide the joint venture’s components demand and also its innovation and experience in consumer electronics market can improve the position of both brands in the mobile phone market. At the same time Ericsson started to downsize the mobile phone business and sold its several factories in Brazil, Malaysia, Sweden, the U.K., and the U.S to Flextronics. Finally Ericsson and Sony signed the memorandum of understanding in April 2001 and Sony Ericsson Company a 50-50 joint venture between Sony and Ericsson started in October 2001.
A decade with Sony Ericsson, Collaborations and Rivalries between parents
Sony Ericsson demonstrated mixed performance during near a decade. The company did not achieve any profit for nearly three years from start and the parents invested another $500 million to the company during the period. However, the profitability was continued until the fifth birthday of the company when Miles Flint, Sony Ericsson former president, who was successful to convince Sony to allow using of two popular brands, Walkman and Cybershot, on Sony Ericsson mobile phones, announced their goal to become the third largest mobile phone maker in the world within five years, the position that Ericsson had before the joint venture. The company gained the third position on the third quarter of 2008 but failed to achieve profit.
Although there is not any public information regarding the financial transactions and/or terms and conditions of the agreement between two parent companies regarding using Sony Brands on Sony Ericsson products, since the W800i, the first Sony Ericsson Walkman phone, introduced in February 2005 at 3GSM congress in Cannes, it seems the allowance of using Walkman brand on Sony Ericsson phones granted by Sony before beginning of 2005, couple of months before appointment of the new CEO at Sony.
In June 2005 Sir Howard Stringer appointed as the first foreign CEO in the Sony’s history. His attitude towards the company’s joint ventures especially Sony BMG Music Entertainment and Sony NEC Optiarc in 2008 which ended up to acquisition of both companies by Sony, raised some rumours about the same action against lose making Sony Ericsson especially after Stringer’s interview with Die Welt in August 2008 which He mentioned that: “Buying out the a partner is never an easy thing.” That showed his intention or maybe failed attempts to acquire the whole company.
About one month after this interview Sony Ericsson introduced its first digital photo frame, IDP-100, as rival to Sony’s range of digital photo frames. At the same time several photos from Sony Ericsson “PSP phone” published in the internet.
During the first years of his management, some symptoms of conflicts between two parents appeared. Although, Sony granted using Cybershot brand on Sony Ericsson phones on February 2006, couple of months after Stringer appointment, which can be considered as previous agreed plan between former CEO of Sony and Sony Ericsson, but until 2011 Sony did not allowed Sony Ericsson to use any other Sony brand.
The weak performance of Hideki Komiyama, the first Sony Ericsson president which was appointed by Stringer to lead Sony Ericsson in September 2007 and was one of his closest co-workers of Stringer in Sony USA, ended up to an exceptional swap in managerial roles between Sony and Ericsson in October 2009. Before formation of Sony Ericsson, both parents agreed that the president of the company would be appointed by Sony while chairman of the board came from Ericsson. This agreement remained unchanged until October 2009 when Sony Ericsson introduced the first CEO and not president from Ericsson, Bert Nordberg, and the First chairman from Sony, Sir Howard Stringer. That could be perceived as distrust of Ericsson to execution management of managers which was appointed by Sony, especially Komiyama. The company adopted Sony new revealed brand message “Make.Believe” instead and vowed the aligned collaboration with Sony.
Sony Ericsson has focused on producing Android based smartphones, according to Bert Nordberg, The CEO and president of Sony Ericsson. But it seems Sony has big plans for Android as well. Sony has invested on Android based devices heavily. The company was the first TV maker which introduced Google TV equipped televisions based on the Google Android on May 2010. Also, Sony and not Sony Ericsson introduced two tablets based on Android which will be available from fall 2011. The company has developed an application for its e-book store for Android devices and more than that it is working on its dedicated platform named PlayStation Suite, to bring PlayStation games on PlayStation certified Android devices, which has three known members until now: Sony Ericsson XPERIA PLAY and two recently introduced Sony Tablets, Code names: S1 and S2. The recent update of Sony internet TVs allows users to control their TV via their Android base devices. All of those actions clearly show Sony’s intentions to use Google Android as the main platform of its consumer electronics and entertainment products. In some cases Sony officials see Sony Ericsson as a rival. For example last year on December 2010, Sony’s head of TV division, Hiroshi Yoshioka, in an interview with New York Times, described the collaboration between Sony and Google on TVs “More” than “Sony Ericsson and Google on smartphones”. So it seems Sony is really serious about Android.
Sony gets ready to acquire Sony Ericsson.
On 10 May 2010 Sony announced restructuring its business under two main cores: Professional devices and solution group and consumer product and service group. They also introduced the new division names VAIO & Mobile business group. The first products of the new group which can be considered as mobile devices were S1 and S2 Android based tablets.
