Sometimes, great results can bloom out of tragedy. Popular examples might include a phoenix emerging from the ashes, civil rights from segregation, and immunizations from years of failed tests and false-hopes. Sony Ericsson is, in fact, one form of a phoenix, and the topic of today’s blog on Joint Ventures.
The company, Ericsson, began in the U.S. as Ericsson Mobile Communications. A partner of General Electric in the early ’90s, Ericsson quickly grew to be the third largest cellular telephone handset-maker in the world. Unfortunately, production came to a grinding halt on March 17, 2000, when their single source for chips–the Philips factory–caught on fire in New Mexico. The fire contaminated the sterile facility, and when it became clear that production could be delayed for months, Ericsson began to sweat. Not only were current models being held up, but newer ones that were set to launch couldn’t be released. The company began to suffer huge losses and considered outsourcing to Asian companies.
At the same time all of this was happening, Sony was taking part as a marginal player in the worldwide cell phone market, with a share of less than one percent at the time of the Philips factory fire. In August 2001, the two companies decided to merge.
When it comes to all the components that create a joint venture relationship, Sony Ericsson is the perfect model. When they decided to come together, Ericsson contributed the majority of their communications company (excluding Ericsson Mobile Platforms which was a very small portion), and Sony contributed its entire handset division. The company they created had an initial employee base of 3,500. The strategy of the company was to release new phones that were capable of digital photography, downloading and viewing video clips, and personal information management. Because this was all occurring in the early 2000’s, this concept was still all a novelty. They released models with built-in digital cameras and color screens.
As with any relationship, one must take the good times with the bad, but know when to stick with it and simply work a little harder for happiness. The first couple years of the partnership mirrored those of most marriages: they were tough. Both companies experienced profit losses, despite booming sales. Nevertheless, with a little faith, hope, and hard work, the dry spell ended in 2004. All the sudden, the net income began to pick up. In 2005, Sony Ericsson introduced the K750i with a built-in 2 megapixel camera, followed by the world’s first 8-Megapixel phone, the Sony Ericsson K850i, in 2008.
While the Sony and Ericsson partnership didn’t last forever (hard times fell on the cell phone company in 2007, with the launch of Apple’s iPhone, and Sony acquired Ericsson’s shares of the company in 2012), for many years, Sony Ericsson had the kind of joint venture partnership many companies dream about, and a partnership many should emulate.