Sony Ericsson to receive new capital injection

Sony Ericsson to receive new capital injection
Paris — Sony Ericsson Mobile Communications AB, the loss-making mobile telephony joint venture founded by Sony Corp. and Ericsson, will receive fresh capital investment, 150 million euros ($162 million) each, from its parent companies during the quarter ending March 31, 2003.

Despite the joint venture's publicly stated goal of becoming the world's leading mobile phone maker by 2006, the venture, which is yet to become profitable, has been a disappointment to both of its parent companies. The company has been losing market share to its competitors such as Nokia, Motorola, Samsung and Siemens.

During the fiscal year of 2002, Sony Ericsson posted a loss of 241 million euros after tax.

The new 300 million euro capital infusion is critical to the currently financially strapped joint venture "to strengthen the capital structure, get the business up and running and support much more dynamic marketing activities," according to an Sony Ericsson spokesman based in London.

Since the joint venture was founded in October, 2001, at which time both Sony and Ericsson contributed 280 million euros each to the venture, Sony Ericsson had not received any further investment from its parent companies until now.

The two parent companies claimed in a statement that the new investment represents "the continuing commitment of Sony and Ericsson to the joint venture."

Sony insisted that Sony Ericsson would turn profitable in 2003.

Sony Ericsson estimated about 395 million handsets were sold in the total market during the full year of 2002, while forecasting it to grow to 435 million units during 2003.

Nokia last week said that it expects handset sales to grow to about 445 million this year.

According to the joint venture's fourth quarter results announced today ( Wednesday Jan. 29 2003), Sony Ericsson increased sales by 18 percent to 1.235 billion euros during the October-December quarter. During the fourth quarter, the joint venture shipped 7.1 million handsets, up four percent from the same period a year earlier, according to the company.