Sony Ericsson, the world’s No. 4 mobile-phone maker, expanded its lineup of low-cost phones Tuesday, joining bigger rivals in the fight for customers in emerging markets. The London-based joint venture between Japanese electronics maker Sony and Swedish telecom equipment vendor Ericsson unveiled eight new phones, four at the low end of the price scale and four higher-priced models.
The company said it was launching two new Walkman music phones, the W880 and the W610, and two Cyber-shot digital camera phones, as well as the four low-end phones. The low-cost phones have color screens, and two have a basic digital camera. They will be available in the second quarter of 2007. The company has a history of selling devices with features and prices slightly above those of its competitors.
Sony Ericsson’s head of Nordic operations, Johan Mathson, said he expected the four basic phones to sell somewhere between 50 and 100 euros, well above models priced as low as $30 and $40 from Motorola. Ben Duffy, European head of marketing, said Sony Ericsson would not go as low as $40 at the launch. Sony Ericsson is the fastest-growing mobile phone vendor in the global top five as a result of the success of its Walkman and Cyber-shot phones. To date, it has sold 20 million Walkman phones and 4.5 million Cyber-shot phones, the company said.
The company had a fourth-quarter global market share of 8.7 percent, up from 6.6 percent in the year-ago period. While Sony Ericsson has focused mainly on the segment of higher-value phones, its bigger rivals Nokia, Motorola and Samsung, battled it out in emerging markets with low-cost phones, pushing down the average price per phone, and in the cases of Motorola and Samsung also resulting in lower profit margins.
Sony Ericsson, which is now the second most profitable phone maker behind Nokia as a result of its focus on expensive, high-margin phones, has said it will no longer stay on the sidelines in this battle and that it wants to become the world’s third-biggest mobile phone vendor. Nokia, with its 35 percent market share and superior profitability, has shown that large scale creates an important competitive advantage.
Sony Ericsson last week said it will start producing phones in India to cater to the needs of customers in that market. Analysts weren’t too concerned about declining profit margins as a result of the new phones. “They deliver according to their strategy, with good balance and control over growth and good profitability,” said analyst Mats Nystrom at SEB Enskilda. “The product portfolio is going gradually toward low end and therefore neither ASP (average selling prices) nor margins should come down significantly.”
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