Sony Ericsson Launches New Phone Line

Struggling handset maker Sony Ericsson(SNE) (ERICY) launched a line of next-generation phones Tuesday, in a bid to stay afloat in the wireless business.

The company unveiled five new phones, as well as several wireless PC data cards and a collection of music and photo-taking accessories in 30 regions across the globe.

Yet analysts expressed caution about the launch, given the intense competition in the wireless handset market.

"Getting some new handset models on the market should help the company strengthen its market position, [but] in a market that's [only] growing 10% [this year], it's going to be tough to grow market share," said W.R. Hambrecht wireless analyst Peter Friedland. W.R. Hambrecht has no investment banking relationship with Sony Ericsson.

Gartner Dataquest wireless equipment analyst Bryan Prohm agreed. "These new handsets are clearly not enough, in terms of quality or quantity, to make a substantive difference in [Sony Ericsson's] share position during 2003," he said. "Most of their key competitors are going to have products of a similar ilk, and at a far lower price."

Sony Ericsson was conceived in 2001 as a 50/50 joint venture, under the thinking that by merging the handset operations of one of the world's largest electronics companies, Sony, and the world's largest wireless telecom gear maker, LM Ericsson, the deal would improve each other's lagging handset sales.

At the time, critics argued that joining the two ailing units exacerbated the problem. Indeed, the company's performance so far has provided some support for that theory. Since its launch in October 2001, Sony Ericsson has given up market share to its peers. By last year, it had slipped to the No. 5 spot.

As of the third quarter of last year, Sony Ericsson phone sales had fallen 30.4% from the third quarter of 2001, while Nokia(NOK) sales had improved 13.5%, according to a Gartner Dataquest study. The venture's market share stood at 4.8% in the third quarter, according to the same study.