Sony Ericsson Mobile Communications AB

Sony Ericsson Mobile Communications AB
is a joint venture established in 2001 by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. Both companies have ceased making their own mobile phones, letting the new company use Sony's knowledge in consumer electronics and Ericsson's know-how in cellular technology.

The company's global management is based in London; it has Research & Development in Sweden, Japan, China, the United States, and the United Kingdom; and approximately 5,000 employees in total worldwide. The current President is Miles Flint, and the Corporate Executive Vice President is Ericsson veteran Jan Wäreby.

Sony Ericsson announced its first joint products in March 2002 and now has a full product portfolio covering all target groups. Sony Ericsson mobile phones are known for having good quality displays, stylish design, an attractive user interface, good imaging capabilities, and a large set of entertainment features. Sony Ericsson introduced new Walkman-branded W series music phones in 2005 (eight models to date, W300i, W550i, W600i, W700i, W800i, W810i, W900i and W950i).

In 2005, Sony Ericsson sold about 50 million units. In 2004 they sold about 42.3 million mobile phone units. In 2003, shipments were 27.2 million phones.

Sony Ericsson posted its first profit in the second half of 2003, buoyed in part by sales of its new line of camera phones and a strong showing in Asia. To that date Sony Ericsson had steadily lost money since it was founded in 2001. In full fiscal year 2004 Sony Ericsson earned the net income of 315 million euros and sales of 6.5 billion euros.

According to the IT research consultants Gartner, in the first quarter of 2006 Sony Ericsson was the fourth largest mobile phone manufacturer, behind Samsung, Motorola, and Nokia, and held market share of around seven percent.

Nokia Connection or a new company's strategy on the terminal market

Annually Nokia Connection Forum becomes the place where the company defines the main development directions, gives its vision of the market and changes that take place on it. Usually customers do not see the main development vector behind the announcements of separate devices. They do not notice the facts that are very interesting. So, let's try to understand where Nokia is going to, and which strategy will prevail on the terminal market in the nearest future.

Short before Nokia Connection the company announced two low-end models for developing countries. The announcement took place in Africa, and the company plans the devices will be popular there as well as in China, India, partly in Russia. Two years ago a similar enterprise was held in Moscow, and then the Nokia 1100 and 2300 were announced. The company didn't consider Russian market as quite deliberate, which lead to the shipments of low-end solutions like Nokia 3310. The model was popular at the price fall and remained one of the cheapest offers on the market for long. This very device combined up to one third of the total Nokia's sales on the Russian market, and it seemed everlasting. The Russian market was positioned on the same level with India, Argentina, some Third World countries globally. Thus a capacious name developing markets was applied to Russia also. But unlike other manufacturers Nokia didn't aspire to gain the fashion segment, and the sales there were not supported by ad and marketing enterprises actively till the 2Q 2004. Such companies as Motorola and Samsung gained the lion's share of the market for that time and pressed Nokia hardly, the company failed to return the leading position and takes the third position. The conclusions of the summer 2004 changed the strategy greatly, and Russian got some more priority, new financing for marketing and advertising, which helped growing the sales in the middle and high-end segments.

And Nokia Connection gave a belated explanation sounding intriguingly and is mainly targeted on the company employees who were responsible for making decisions but not the external world. The announcement of the research covering 8000 participants (both mobile connection users and not) may be taken as this explanation. The research territory covers Ukraine, Russia, India, Indonesia, Argentina. The selection is primordially strange, since considering all the joint indexes Russia comes as an evident favorite among other participants. Even a terminal ASP is two times higher on the Russian market than in Ukraine (precisely, 1.73), and the market capacity is much higher. Comparison with Indonesia shows even a greater gap.

One of the questions concerned how much users are satisfied with their operator. Averagely, 86 percent of the questioned answered they were pleased with the service quality. Indian and Indonesian results equaled to 90 and 91 percent correspondingly. About one third of the questioned customers used other operators' services and could make a comparison.

The research gives a wonderful conclusion the user is prompted to choosing this or that operator not by tariff plans, but the only reason is "signal level and good reception". That was the answer of 48 percent of the people, ad the price per a minute and tariff plans were determinant for 41 percent. However, the service price comes to the foreground when changing an operator (44 percent) and the connection quality gets the second place (32 percent).



More that half of the respondents told they found voice calls important and they planed to increase their number in future. That is more than real with the current tariff plans, but the question is how necessary that is. And here is the main idea of the research, it consists in the brand name is one of the basic factors when choosing a device, ad its technological saturation often plays not the least role. That is the terminal price goes to the background, and the main thing is voice service quality and the number of offered technologies, and a brand name allows taking extra charge. The company makes a conclusion the determining role of the price (which is an entry ticket for the cellular connection world) is not as important, the market is different now, and the ASP may be higher than the present. In another words, the brand name extra charge will grow starting with this year, that is one of the Nokia development lines. Besides a standard markup for middle-class devices (which is a markup of a similar device with comparable functions by the second echelon manufacturers or direct rivals in the Top5), the company plans to take up to 25 percent and even 35 percent for high-end products. A true example is the premium segment and the Nokia 8800 represented in it. The example is not demonstration, since the premium-segment distinguishes with high extra primordially. Then let's take the art-deco collection including the Nokia 7260, Nokia 7270, and Nokia 7280. Against a background of the last model having no copies on the market and even in own model line, which allows practically any price, two other models are now very peculiar. For instance, the Nokia 7270 is a bit retouched version of the 6170 with some hardware and software changes and, which is the main, another positioning. And here is the very extra we are speaking about. The experience of positioning a separate collection in the context of a product line turned out to be successful, and thus the company represents a series with separate numeration starting with letter N. These are multimedia devices with the maximum set of characteristics and focus on this or that function. And if the N70 is a classical smartphone with average characteristics (which users wanted to see in a model of the Nokia 6630 class), then the N90 is predicted for shooting, the N91 for listening to music. Considering the platform used in other models, the same soft which is only developing, we can say something beyond the given functions to draw attention and explain the prices was necessary to devise. Using various body materials, for instance, stainless steel (N91), and co-branding (Carl Zeiss and glass optics in the N90) became an evident way out. And thus the company explained the users what they pay for. The N70 and N90 differ in the optics (plastic and glass), the absence of autofocus in the younger model. Adding autofocus to the N70 would mean a lot of work, but then the model would have no evident differences from the N90 in the picture quality, which broke a primordial idea of different positioning.
Two conclusions are made. The company plans to increase the extra for high-end models, and that is the first time the research showed it was possible. The second conclusion is the material quality, product design but not functionality will form the difference from many phones. An at the same time, younger models will be kept in the background of the elder ones, they won't be so actively advertised and will be promoted as the solutions for discerning users.
Two clips demonstrating using Nokia's phones for business were shown at the conference, they were to illustrate the change of the company's strategy, a more precise product segmentation for various consumer categories. The first clip showed an Indian fisherman with a low-end phone. According to his words the device is not used to call for help in extreme case, not for calling home or his relatives, but first that is a business instrument. The explanation was quite original - after fishing the man phones port markets to know where the price for fish is the maximum and goes there with all his catch. As for me, the story is too artificial leaving more questions that answers. Straight off we supposed those very salesmen on the shore may use the phone for making a cartel agreement, and fishermen are unlikely to neat down prices then.

The second sample represented a mid level manager in Poland using the Nokia 6600. It was closer to the impressions of the device, its possibilities than any forced situations.

The idea standing behind the clips and actively promoted by Nokia's top manager during the conference sounded like: "Innovations for billions of lifestyles". The new paradigm of the company tells the phone has to response to one's personal life experience, and since we are different, the devices should vary also. Creating various models is possible due to offering a basic operating system, its primordial tuning for user's needs, active work with other providers, application developers. Doesn't it resemble a smartphone development concept? That means building various devices starting with the appearance (youth or classic, vivid or monochrome) and ending with the set of preinstalled applications (not at all or only business utilities included for free, the basic functionality is the same) is possible on the one platform. Also variation of technical parameters is possible, that is operating system versions, processor clock rate, memory type or capacity, the presence or the absence of extra functions, like radio. The company started following the strategy wholly in 2004, and we'll see it developing in the course of some next years. It seems the Nokia Connection announcements bring nothing new, everything was clear before. But really, the company told publicly it would starts manufacturing more phones which were gain all the price niches on the market. Basically the models will resemble each other but resulting differences will be quite serious. Just remember the comparison of the Nokia 6630 and Nokia 3230, despite all the paper similarity; in actual fact these two phones are absolutely different.

Another conclusion is not as evident. The device life circle will shorten due to higher segmentation and targeting on a certain group. And if earlier a new model remained up-to-date at least for a year or even more, then now this time will shorten and will form about 6 months this year. Then even a 3-4 months period will be possible. That will make the company produce more and more intermediate models. However users won't rush for changing their phones so fast and will do that once a year or more seldom as before. And here are several solutions of the problem. An evident and direct one is the fast fall of the price shortly, which is unacceptable for a brand with high extra for a brand name. Another solution is more refined and offers setting primordial prices on the level with the rivals or lower and then keep them high. Thus making the rivals dump and sale own products with a certain margin. Fats model line renewal solves the question of demand for "old" devices, they got outdated and no lead out of the market is necessary, just manufacturing capacity should be decreased. The situation will get paradoxical; with time the company's margin of the old products and the income itself will not decrease and on the contrary will rise. And also the question of rival companies is solved, they either will have to start cloning the phones or start loosing the market. Not just technical saturation of the model is meaningful when producing many models, but design solutions and material. And here Nokia has a traditional advantage using it now fully. Thus, the company managed to dictate the development line to its rivals for several years, like happened with the 40th platform. The result of turning to the only platform was the Samsung's answer step, which showed mass of alike products different in one-two features and design. Then this strategy brought profit, but will it remain successful today?

The customers' discontent is one of the Nokia's threats connected with a rapid shortening of the separate product's life circle. Buying a device with a certain set of characteristics we do not expect a much better device will be produced or announced in 4-5 months. For instance, the Nokia N90's customers will be "glad" to know Carl Zeiss optics may be integrated into the N70 size, but the main sales will have been committed by then. The comparison with Sony and its fast development of the PDA direction comes to my mind. New devices overtaking the previous ones in ergonomics, possibilities were represented every 3-4 months and they attracted their users. Customary users were dissatisfied with the fact their investments into PDAs depreciate in their sight. The moral obsolescence was so fast that pushed a part of potential audience away. And in the Nokia's case this is also possible.

A necessity of using all the possible phone variations became one of the side effect of a wide product line. The company started offering new form-factors (clamshells, sliders) and didn't bother of producing models similar to Samsung phones (being very popular). And this means Nokia will produce more clamshells and sliders in short time. If the Rotate form-factor gets necessary popularity, such devices will also be manufactured.

The changes in the company's strategy are very serious and hard to describe in the only report, there are many nuances and small details influencing the whole situation. We tried to give a general view of the company's strategy and describe evident consequences of its implementation. In the future half year we'll see the results of the made decisions, and then the events will happen even faster, which will bring many new models.

P.S. Nokia leads negotiations about licensing the Picsel Viewer and Picsel Messanger technology for both smartphones and phones. If the company licenses the technology after Motorola, Samsung, Panasonic and some other manufacturers it will take a serious step forward in the business segment. Read about the technology in the Samsung D600 review these days.

Crisis on the Russian mobile market. Facts and conclusions

Now the central mass media has highlighted and discussed the events started on the 15 of August much. The hysteria about this theme raised and greatly increased the first effect making the situation even harder for everybody. The victims are companies trading mobile phones, their bailees, logistic centers and, finally, usual customers who did not expect fast price growth on all the models of mobile phones. This is the first such all-consuming crisis on the Russian market. And now we decided not to write about the reasons of the crisis, its presuppositions and not to bring fuss in this very painful question. Much has been said, and in 95 percent all the written and spoken doesn't represent the facts, these are only allusions, but at the same there is no lack of information, and usual people are oriented in the happening things "rightly" and understand who "was stealing" and "is guilty". And now it doesn't matter who initiated this (these people are most likely to be found, since too much is staked), but the crisis is developing by its own rules and got out of control - too many power is involved in it. No doubts, the consequences will reduce the volume of the Russian mobile market and will tell upon subscriptions to our mobile networks. Both this will negatively influence companies' turnover and the national treasury, less taxes will be collected (the government will lose at least 50-80 million USD in September). Let's evaluate the first and the most valuable aspect, namely the crisis' influence on the retail market in Russia and the process on it.

Presuppositions:

* The seizure of mobile phones and accessories at the Russian customs, the total cargo cost is valued of 10 million USD (50 tones);
* The following searches and impressments of phones and accessories in the warehouses of Moscow distributors (250 tones;
* The omitted phones are valued at 55 million USD (400000 pcs);
* The number of omitted phones is a bit less than a weekly market need, which reaches 550-600 thousand items in our valuation;
* The omitted devices were to be realized both through wholesale and retail channels (own companies' retail);
* From May to August we observed deficiency for a line of products, and demand was outgrowing supply several times. Motorola RAZR V3, Nokia 8800, Samsung E530, Samsung D500, Sony Ericsson K700 and K750 are typical examples of such models. As a result the price for them either was fixed and couldn't fall or even was growing. A good example is the RAZR which grew 10 per cent in price in the middle of July (both colour solutions);
* The customs work caused troubles from May to August, and the distributors couldn't supply the market with models in enough quantities, which shortened the warehouse stocks all over the country;
* For the 15 of August the warehouse stock of mobile phones formed about 2.3 million terminals, which gives about 2-3 weeks of normal retail functioning (the left-over structure is not flat and fully depends on the manufacturer shortening the market firmness);

The presuppositions given above show if the market had not been functioning calmly then it anyway was not experiencing starvation rations till the 15 of August. The impressments of the phones were painful for the companies figuring in this deal, but they form only about 50 per cent of the Russian market. The number is quite significant but not crucial for the whole business. The crisis happened was the indicator of the fragmentation of some players and their incapability of getting consolidated for solving problems common for the whole industry.

The victim companies are the market leaders and they form a guiding line for the others. It's an open secret all the companies trace the price changes in big retail networks (and wholesale channels as well) and form their price policy reasoning from this. And what happened after August, the 15?

First, that was a shock, the weekly supply loss instantly influenced the wholesale, and the life came to a standstill in this segment. And this concerned only Moscow region, all the others lived in normal mode, since this supply delay could have influenced them only in a week or 10 days - shipping takes time and the products delivered earlier before the crisis moved to the destination points. Another important factor for big companies is nobody maintains a centralized warehouse with all the goods for the whole country. The majority of the companies prefer making regional warehouses in node points, which is better for logistics needs. So, the crisis hasn't affected these ones and their mobile phone stocks.

But this information was not taken into account, since no data about the solving of the situation was available, and the market started its pique. The situation was forced, and the prices really grew in the huge networks first. The reason is average sale time is shorter in big networks (the turnover is higher), and the stock is consumed faster. The price correction by Svyaznoy and Euroset was a sign for the market, and all the companies took similar steps. The first day gave the growth of 10 per cent, and then it reached 15-20 per cent; in some networks the growth even formed 25 per cent with some positions exceeding the original price several times. For instance, in Svyaznoy the price for Nokia 8800 grew to 88999 rubles from 49999. And it's even more prestigious to buy Nokia Vertu for this money; its price has not changed.

And what is the price growth conditioned on? There is no commercial presupposition for the price growth except for the two hugest players. The speed of the products going out is crucial for them and soon they come to starvation rations. And that's why the decision to increase the price in a group was made elegantly and smoothly. The rivals excitedly told about Euroset representatives buying phones in short supply in their retail networks. The underlying theme is clear: "We are alright, we haven't suffered, and Euroset is evidently in difficulties". They still have not understood that on the opposite make good climate for both Euroset and Svyaznoy by their statements. A curious fact is Euroset has truly managed to buy some models that had the most obvious potential for price growth and were in short supply before. Against the background of rapidly growing prices they provided adequate margin and allowed the company to minimize the influence of the total price fall. And also the company finally got an essential breathing-space: while the retail sales reduce (from 30 to 60 per cent depending on the network after the price correction), the company will restore warehouse stock and normalize the situation. The same concerns Svyaznoy, both players are in the same situation with only one difference, at the crisis start Svyaznoy entered the market with small warehouses. This negatively influenced the network, the assortment is low, the most popular models are lacking and there is no place to get them in corresponding quantities.

And once again we'll point out the majority of the game players still have warehouse stocks and products in retail nodes, and that will help them functioning normally for 2-3 weeks. The price growth is caused by the market unclearness, the law machinery rousing negative spirits (what would their statements about the rapid sale of the forfeit products cost when no court decision was made). This unsolved situation causes the price growth, which brings instability and prevents from foreseeing approximate dates of term for possible legal cases. If the market got information telling all forfeit products would be sold to the third party players, deleted, sent to Mongolia or something else, this unclearness would disappear and the companies would work like in a normal mode. While the situation is not solved, we can't expect the market current situation to improve, which is the only and the most negative factor for today.

Speaking frankly, not all the companies increased the prices, in some non-network shops and small networks phones cost the same. The occurrence is temporary, and these networks will not stand even the next days and will raise the prices like the others. The price correction will reach 15-20 per cent of the before the crisis since the 22 of August. The further price growth is not just possible but is caused by a moderate deficiency on the market, and it may grow. Total cost growth can reach 40-50 per cent.

Unfortunately, Russia will no longer be a country with one of the most attractive mobile phone markets and low prices. The total price growth will form about 30-35 per cent even after the current crisis is solved, and it'll be caused by the companies' wish to get rid of wholesale direction and compensate the losses caused by the seizure (and by the way these companies control half of the market). The grey market will inevitably grow, and we should understand this will be "trunk" carting. Today the retail price for Sony Ericsson K750i forms $320 in Germany and in Moscow at the same time it costs about 550-650 USD. And now calculating we can expect even selling for $420 the carrier won't end up losing. And it won't make any trouble bringing 10 phones in your suitcase, many people practiced this ten year ago. And here is in proper how the market will survive. The "trunk" carting volume can form about 20 per cent of the total market in September with the current situation preserved, and that is very much!

The price growth will influence the sales volume, as well as the growing number of the companies oriented on only retail. We will observe the market growth slowing down, this year it can form 30-31 million terminals and not 32-34 predicted earlier. An entry ticket for ones having no phone now will also increase, which will negatively influence the operators' indexes (though will not press greatly, since the main resource is already selected). A curious and quite a logical thing is growing prices on the used hardware market. The crisis will touch even the Commonwealth of Independent States market, and first that will be the Ukraine. At the beginning no market changes will be noticeable, and then the market will even out on higher price levels.

We think now customers should either postpone buying a mobile phone or hurry up and find a shop with old prices today. Further the price for some interesting models may reduce, but we should understand the market is unlikely to lower greatly. The new devices expected in August will appear in September and will cost much, since the sellers will make money on them.

And in the end, I'd like to note the market lives and the crisis can't destroy it despite all the seriousness. The possible changes may influence the companies' turnovers, though their profit will increase. So, you need find positive points in negative things.

P.S. After the situation solves or at first signs of it, we'll write about the crisis in all the details and aspects. Now we are not going to increase the present hysteria on the market.

Present new blog

Hello. Today our team start new blog. We'll post reviews of mobile devices like cell phones, PDA and other. If you want special device review, please, write it in comments. Thanks.