YOU ARE AT:Archived ArticlesHANDSET MANUFACTURERS SEARCHING TO FIND NICHE JRC ANNOUNCES REORGANIZATION

HANDSET MANUFACTURERS SEARCHING TO FIND NICHE JRC ANNOUNCES REORGANIZATION

NEW YORK-Faced with falling cellular phone prices and formidable competition by the four heavyweight handset manufacturers, smaller, Japanese-based players are pursuing other options in the U.S. marketplace.

“It’s going to be a brutal year,” said Francis McInerney, a principal of North River Ventures, New York. “But there is a much bigger opportunity, a global explosion, around the corner for in-home wireless-turning your own home into a television station linked to cellular, paging, the Internet.”

JRC International Inc., formerly known as Japan Radio Corp., is the latest example of a retrenchment underway among the smaller players in the domestic handset sector. The company is fending off rumors that it is closing its headquarters in Fort Worth, Texas.

However, as part of a reorganization strategy, JRC recently laid off an undisclosed number of personnel so it can pursue niche markets with higher profit margin potential in a cost-effective manner, said Randy Borne, vice president of product development.

One of those niches is prepaid cellular phones to help solve the one-in-three customer credit rejection rate experienced by carriers on average. Field testing began last week in Washington, D.C., and will begin in spring in Chicago, New York and Philadelphia. Borne said JRC is working on this endeavor with two “major” partners, whose identities he declined to release yet.

JRC also continues to work with ReadyCom Inc. on a partnership to integrate ReadyCom’s ReadyTalk technology into JRC’s phones. “ReadyTalk is non-realtime cellular service designed for paging,” Borne said. “The cost of service is about that of alphanumeric paging, but it permits greater content and two-way communications.”

JRC, which will continue to operate its manufacturing plants in Canada and Japan, also is working on a mid-year debut of a handset using Omnipoint Corp.’s digital hybrid technology for personal communications services.

Additionally, JRC is seeking other opportunities as an original equipment manufacturer to supplement those with AT&T Corp., whose recently announced reorganization has diminished its demand for JRC’s OEM equipment.

Last month, Fujitsu Network Transmission Systems Inc., based in Richardson, Texas, announced it will stop producing its analog cellular phones by the end of March.

And late last year, Toshiba America Consumer Products Inc., based in Wayne, N.J., announced plans to discontinue manufacturing its own brand of cellular phones. The company will continue to serve as an OEM for the Audiovox brand, a Toshiba spokesman said.

Panasonic Co., a division of Matsushita Electric Corp. of America, “is in the same boat, and keeps rumbling about getting out,” said Jane Zweig, vice president of marketing for Herschel Shosteck Associates Ltd., Wheaton, Md. Meanwhile, Matsushita “is moving aggressively into a wide range of in-home wireless equipment,” McInerney said.

Like JRC, Oki telecom also is combating speculation that it is getting out of the analog cellular phone business in the United States. Oki officials say their strategy is to add product lines that provide feature enhancements.

“Contrary to rumors, Oki is not stopping production,” said Coby Sillers, senior vice president of sales and marketing for Oki telecom in Suwanee, Ga. “As a matter of fact, we are introducing a new family of analog cellular phones known as ClearMate at CTIA [that include] key features such as user authentication.” The products will be Interim Standard-91A compatible and able to function with Oki’s newest Residential Base Station System called the LibertyLine, which allows a cellular phone to perform as a cordless phone in the home and as a normal cellular phone outside it.

Motorola Inc., Nokia Corp., NEC Corp. and Ericsson Inc. together control 75 percent to 80 percent of the cellular handset market in the United States, industry analysts say. Brand name recognition, broad distribution channels, high-quality products, diverse product offerings at varied price points, deep pockets for research and development, economies of scale in manufacturing and savvy marketing programs provide the big four with significant strategic advantage, according to Zweig and Alex Cena, telecommunications equipment analyst for Lehman Brothers Inc., New York.

“The margins are so slim because it’s too tough to compete against the major players,” said Borne of JRC. “They have economies of scale, and we just got clobbered.”

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