When Sony (SNE) and Ericsson (ERIC) found that neither had enough market share to go it alone in the global handset business, they merged their operations.
During 2007, the joint venture moved its share of the handset business from 7% worldwide to 9%. Sony-Ericsson appears to be doing very, very well. In Sony’s recent quarterly report, it showed net income of 30.4 billion yen for its piece of the business. Sony’s total net was 200.2 billion yen so the handset operation was a big contributor.
With its sales falling, Motorola’s handset division shipped 40 million phones last quarter. That would put is share at 12%, behind Nokia (NOK) at 40% and Samsung at about 15%.
In the fourth quarter, Motorola’s handset division had revenue of $4.8 billion and lost $358 million. For the year 2007, Sony Ericsson had revenue of $12.9 billion euros. More important, it has operating income of $1.5 billion euros. (One euro equals 1.5 USD)
Sony-Ericsson could take the Motorola handset business and rip out a lot of duplicate costs. A combined company would have over 20% of the global market, putting it as a solid No.2 behind Nokia. Could Motorola get 33% of the new company? Maybe not. But, it could get a sizable piece of what could instantly be a very profitable, strong global handset operator.
Douglas A. McIntyre
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