Ericsson's Microsoft Venture Doesn't Address Its Real Problems - TheStreet

Question: What do you get when you mix desperate and aggressive? Answer: the

Ericsson

(ERICY)

Microsoft

(MSFT) - Get Report

Mobile Venture.

Ericsson is desperate to change its image as a lagging handset manufacturer, and Microsoft is aggressively trying to gain a foothold in the mobile-phone market. As a result, the companies launched their Ericsson Microsoft Mobile Venture Monday, promising to "develop solutions" that will enable wireless carriers to offer email, calendars, to-do lists and secure access to corporate intranet sites by year-end.

Hooking up with Gates & Co. has a certain cache, and, to the extent the "solutions" are developed, it will be an attractive product set, analysts say. But they add that a Microsoft alliance isn't going to help Ericsson with its real problems, which lie in its handset designs and production timelines.

"The software might help to improve marketability, but Ericsson's problems are not software," says

Bear Stearns

analyst Wojtek Uzdelewicz. "From an investor-evaluation standpoint, this is not something to pay a lot of attention to."

And the venture isn't necessarily a home run for Microsoft. Although it's getting into the wireless market, the software giant teamed up with the weakest of the three dominant handset manufacturers. Perhaps that's because Ericsson competitors

Nokia

(NOK) - Get Report

and

Motorola

(MOT)

didn't want to work with the 800-pound gorilla.

"Microsoft has a reputation of being heavy-handed," says

Chase H&Q

analyst Ed Snyder, and Nokia and Motorola are not in as vulnerable a position as Ericsson. "Ericsson is fading from the landscape in terms of the

handset business and Microsoft is nowhere in the business," Snyder says. Nokia is pursuing software with similar capabilities in-house, while Motorola has been working with

Phone.com

(PHCM)

.

The Ericsson Microsoft Mobile Venture, part of a broader strategic alliance between the companies, could mean profits of tens of millions of dollars, but that's not particularly significant to companies worth billions, Uzdelewicz notes. Investors seemed to agree, sending both stocks down Monday. Ericsson closed at $18.44, down 81 cents, and Microsoft closed at $68.81, down 50 cents.