WIRELESS JOINT VENTURES A SHAKY PROPOSITION

Sony and Ericsson, which launched the Sony Ericsson Mobile Communications joint venture last week, say their combined brands and products will help them catch market leader Nokia.

Sony Ericsson Mobile Executive Vice President Jan Wareby said Ericsson knew it had to strengthen its handset business. By combining Sony's consumer electronics expertise with Ericsson's knowledge of the wireless handset market, the companies plan to create “data-intensive, third-generation handsets.”

For Ericsson, which has proven technology but has struggled to get it into a consumer-friendly form factor, a joint venture may have been the best option in the uncertain economic environment, said Matt Finick, analyst for Thomas Weisel Partners.

However, skepticism remains over whether the two large companies, each of which owns 50% of the venture, will be able to pull off the managerial gymnastics required to make it work.

“On the chalkboard, Sony Ericsson looks great,” said T.C. Robillard, Jr., a wireless equipment analyst for Salomon Smith Barney. “Whether this will be good in actual practice — I'll believe it when I see it.”

The joint venture's products are not expected to hit the market until at least the middle of next year, making it difficult for industry experts to judge its potential. It's equally difficult to be overly bullish given the track record of previous handset joint ventures, Robillard said.

In 1998, a similar mobile phone deal between Lucent Technologies and Philips failed to last beyond a year, in part because of corporate conflict. In 1996, Sony formed a joint venture with Qualcomm, but it dissolved in late 1999.

That doesn't appear to be stopping other potential ventures, though. Siemens reportedly has been exploring a relationship with Motorola. Motorola refused comment, as did Siemens.

With Motorola a CDMA and GSM player, Siemens is anxious to move into WCDMA, a business arrangement either for infrastructure or handsets could make sense.

“A joint venture between their infrastructure divisions could be a winning combo — it would put them into a position to be a unified challenger to Ericsson and Nokia,” said Bryan Prohm, senior analyst for Gartner Dataquest. On the handset side, there is no compelling need for the companies to partner immediately, he added.

If Motorola and Siemens could strike a deal, there would be structural challenges. Siemens already has a handset joint venture with NEC and an infrastructure relationship with Fujitsu, while Motorola has an infrastructure partnership with Cisco Systems. “If the companies were going to put that much effort into this, an asset swap might make more sense,” Robillard said.