The problematic mobile phone sector
Since 2000, the mobile phone sector has become increasingly complex than ever. Jan Uddenfeldt explains: “In consumer markets, a failed investment can have major consequences. Suddenly you have developed something nobody wants. Nokia made this kind of error with its mobile phones around 1996–1997 and at Ericsson we did a few years later. Around the start of 2000, Motorola had counted on getting into the low-price market with its mobiles but Nokia knocked them out of it.
“It’s tough when you invest in a production of 100 million units and only sell 5 million. And it only has to happen once every ten or twenty years for a company to collapse.”
Bertil Thorngren observes: “I viewed Motorola as one of the really capable pioneers. But in recent years they have lost a lot of credibility, first on the network side and then for their appliances. The question is whether this is due to less than competent management and their own shortcomings? Or is it an inevitable outcome of the narrow view taken in the US from the very start?”
Microsoft has gone on struggling to gain a footing in the mobile world. During one period its approach was to try to persuade operators to launch their own phones based on Microsoft’s software. Orange tried this with little success in the UK.
Another more successful method was adopted by RIM, Research in Motion, the company that produces the Blackberry. This is based on push technology, the idea that incoming e-mail announces its arrival and does not have to be downloaded. Blackberry has made real inroads into the segment that Sony Ericsson was targeting, the business segment.
Yet another competitor was to be Google. Here the competition is offered by its Linux-based Android software, which has been described as a complete package with an operating system, user interface and everything needed to enable a phone to use the internet and Google’s services in particular.
Google opted to form an alliance based on Android, the Open Handset Alliance, that included Motorola, Samsung, HTC, T-Mobile and eBay. This posed a challenge to not only Apple, Microsoft and RIM but also to mobile manufacturers such as Nokia and Sony Ericsson. In September 2008, HTC launched a touchscreen phone based on Android.
SONY ERICSSON AND THE TRENDS
The investment in Symbian in 1998 was long a successful one – subsequently all the major mobile manufacturers also became partners, such as Panasonic, Siemens and finally Samsung.
About two years after it had been founded in October 2001, Sony Ericsson began to show positive results. In 2004, sales had reached 42 million phones and the profit for the year was SEK 3 billion. This healthy rising trend continued until 2007 when 103 million phones were sold and the profit was about SEK 15 billion. Sales had risen threefold over 36 months, as had the number of employees.
The first quarter of 2008 saw this trend reverse. Since then, each quarter up to Q2 2009 saw a decline on the preceding quarter’s figures. In 2008, there were 96 million phones sold but the earnings for the year were only just in the black.
Something had changed. Svanberg mentions a dramatic decline in the industry in general, while Sony Ericsson was also suffering from growing pains. “This helped to sideline us in the growing smartphone segment, where really we should have reigned supreme.”
The Xperia model, also called the X1 and described as a flagship model, was, for instance, a flop. The Xperia was launched in the autumn of 2008 as the first Sony Ericsson phone to be based on Microsoft’s Windows Mobile operating system and was intended to be a clever means of introducing users to the mobile internet.
But Xperia had too many bugs. And it could not compete with the iPhone in user-friendliness.
Before the end of the year, both Ericsson and Sony Ericsson announced that they were joining the Open Handset Alliance.
One explanation offered by Sony Ericsson spokesperson Gustaf Brusewitz was: “The main advantage of Android is that it is an entirely open system that offers a fantastic user experience.” But he added that development work on Symbian and Windows would continue.
Author: Svenolof Karlsson & Anders Lugn
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