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Sony earmarks $500m for Ericsson

” Sony, the Japanese electronics group, said it expected to invest up to $500m in its mobile phone joint venture with Ericsson of Sweden. The venture, formally unveiled on Tuesday, aims to give both companies a leading global position as the mobile phone converges with the internet around third generation technology.

The venture, to be based in London, will include design, branding, distribution and marketing of handsets and employ 3,500 people, comprising 2,500 from Ericsson and 1,000 from Sony. It will combine operations in the US, Japan, UK and Sweden.

Katsumi Ihara, a Sony mobile devices executive with experience in Europe, will be president of the company, known as Sony Ericsson Mobile Communications. Kurt Hellström, Ericsson chief executive, will be chairman. The joint venture is aimed at resuscitating Ericsson’s ailing mobile phone business, which made a SKr5.7bn operating loss last quarter, and spearheading Sony’s assault on the global market. Despite an impressive record in consumer electronics, Sony has trailed its rivals in mobile phones.

Last year Sony and Ericsson shipped 50m or $7.2bn worth of mobile phones, giving them a 12 per cent market share and third position globally after Nokia of Finland and Motorola of the US. Ericsson alone sold 43m phones but its market share fell badly in the first quarter of this year.

The venture has been structured as a 50-50 partnership despite the disparity in the size of the groups’ mobile phone units. The venture’s capitalisation will be decided after calculating the book value of each company through due diligence. Sony is then expected to pay Ericsson the difference in its value in cash. ”

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