Sony Ericsson “Too Dependent” On Walkman and Cybershot Brands
Another downbeat story on Sony (NYSE: SNE) Ericsson—which is increasingly being seen as the handset market’s next Motorola (NYSE: MOT). The FT interviewed Dick Komiyama, president of Sony Ericsson (NSDQ: ERIC), who said rather gloomily, “Well, there’s always Christmas. Christmas always comes.”
There’s no doubt the high-end handset maker is in a spot of trouble. Profit plummeted 97 percent in the last quarter, while its biggest market—Europe—is seeing phone sales fall, and mid-high end handset margins are coming down.
Meanwhile, the company’s problems make for familiar reading. Like Motorola, which had a hit with the Razr, SE has done well with its Walkman phone. But Dresdner Kleinwort analyst Janardan Menon said the company needs to “experiment with different designs,” noting it was “too dependent” on the Walkman and Cybershot brands. “Just doing more of what you think you’re good at is the wrong strategy,” Menon said.
SE is trying. It rolled out three new Walkman phones in July, targeted at different market segments. It is making an effort to increase sales in emerging markets and will debut a radio phone in India. A lot of hope rests, however, on its upcoming touchscreen smartphone, the X1, from its new Xperia line. But some just aren’t convinced that SE will be able to claw back market share, as the handset market seems to be increasingly owned by those companies with the economies of scale to wring profits out of the tightest of margins. Nomura analyst Richard Windsor believes that on the back of its announced job reductions and cost cutting SE will soon be relegated to a niche player. Not great for a company that only in February had aspired to third place among global handset makers (it’s now in fifth), but as one company source told the FT, “It’s not about being third or fourth. It’s about profitability.”
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Comments (1)
Aug 28, 2008 3:16 PM
SE hath indeed been resting on its laurels for far too long. Originally a great innovation, the Walkman brand was a revelation as a cellphone that was great at playing music, rivaling stand-alone music players. Likewise, the Cyber-shot shewed the potential of a high-end camera with a shutter and flash that negated the need to carry around a separate stand-alone digital camera.
Nowadays, neither line hath any innovation. Iwis, they are now only fashion statements that are hollow shells of the brands that they imply. Their competitors have ploughed ahead with standards that SE hath not even supported yet: built-in 3.5mm headset plugs, separate DSP chips for playing music or taking pictures, mini and micro USB plugs for charging and transferring data instead of the archaic “Fast-port” (which is no longer “fast”), touch screen phones (except for a few G-series and UIQ models smart phones not sold everywhere), and all-in-one designs that go beyond single use brands - the Nokia N-Series being a prime example.
Top SE’s problems off with different quality problems in software and hardware, plus being late to the market with phones that were previously announced. The prime example of this is the C905 Cyber-shot phone, the first announced with an 8 mega pixel camera. By the time it arriveth on the market, it will be beaten to the market by Samsung, LG, and Nokia, who will all then take the market share that could have been SE’s. These problems are well known and well documented. Taken together, they summarize why SE is slowly loosing steam in the market. And why the company mote work rathe and hard or be a footnote to more determined competitors.