Ericsson may stop Sony venture

Ericsson CEO Kurt Hellstrom hopes for profits in 2003

STOCKHOLM, Sweden -- Ericsson, the loss-making Swedish telecom equipment maker, said it would stop making mobile phones and end its partnership with Sony if the business continues to disappoint.

"The message is clear. We will not make the same mistake again,'' Ase Lindskog told Reuters. "We will not put any more capital into the joint venture if it does not show results.''

Lindskog said Ericsson would break up the joint venture with Japan's Sony Corp., the world's second-largest consumer electronics maker, if the business does not deliver satisfactory results in the next two or three quarters.

Ericsson, which is raising $3.2 billion in a share sale to bolster its balance sheet, is struggling to make a profit as global demand for wireless infrastructure declines and handset sales stagnate.

The troubled group has slashed 42,000 jobs and joined forces with Japan's Sony to make mobile phones after posting its first annual loss in 2001. Ericsson has said it would not return to the black until sometime in 2003.

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Sony Ericsson was created in October last year and aimed to be profitable in the first year of its operations. But Ericsson said last month the 50-50 joint venture would make a loss this year.

And there was more bad news for the venture this week. Market research firm Gartner said Ericsson's market share had fallen to 5.4 percent to 5.3 million units in the second quarter of this year from 7.7 percent in the second quarter of 2001.

Finland's Nokia, the world's biggest mobile phone maker, increased its market share and is making one out of every three handsets sold globally.

The joint venture was launch last year as a dream team combining Ericsson's technical expertise with Sony's consumer focus, but its sales continued to suffer from distribution problems.

The venture's flagship model, the highly advanced P800 phone, will only hit shops in September.

Sony Corp. spokesman Gerald Cavanagh told Reuters the company's position on the handset firm had not changed. "We are fully committed to the joint venture and we want to make it a success,'' he said.

Both Sony and Ericsson have committed to inject 500 million euros each into the firm by October 2003, but Ericsson's Chief Financial Officer Sten Fornel said on August 13 that Ericsson would not put any more cash into Sony Ericsson this year and that investment next year was likely to be limited.