After years of demurring on its marketshare ambitions, Sony Ericsson Mobile Communications L.P. has shifted from declarations of “profits first” to emphasize its “credible aspiration” of overtaking one if not two of its three larger rivals.
The asterisked caveat: no timeframe provided. A wise distinction, analysts said.
Gaining a spot among the top three global vendors has been a stated goal since October, according to a Sony Ericsson spokesperson. As recently as March at CTIA Wireless 2007, however, President Miles Flint repeated the profit mantra and demurred on questions of his company’s market-share goals.
“Without profit, you’re nothing,” Flint said at the trade show. “It’s baked into our DNA: profit before growth.”
Chasing market share is perilous, Flint added, and he cited Motorola Inc.’s woes to support his point.
Credible aspirations
Apparently, however, SEMC has assessed both its profitability and volume growth and decided that now is the time to break into a sprint-or, at least, articulate some lofty goals.
The company’s profits and volumes have come from burgeoning international sales of the company’s mid- and high-tier music and imaging phones and from its careful, cost-management efforts in introducing entry-level handsets in emerging markets. Though the U.S.’ carrier-controlled, 60%-CDMA market remains a knotty challenge, SEMC has enjoyed a rapid ascent in nearly all other global regions.
Perhaps ironically, an SEMC spokeswoman last week cited Motorola’s recent plunge in global market share as supporting evidence for the Japanese-Swedish joint venture’s new emphasis. Motorola has been widely faulted for pursuing market share at the expense of profitability in a head-long challenge to Nokia Corp.’s supremacy.
“Our goal is to become a top-three player,” said Merran Wrigley, who leads the company’s global PR efforts. “That goal now looks more attainable. It’s a credible aspiration.”
Wrigley said that attaining the No. 3 global ranking-or better, she added-has been SEMC’s declared goal since last October, when the JV celebrated its fifth anniversary.
Numbers nut-and-bolts
Of course, despite impressive growth-SEMC posted a 60% gain in unit shipments between the second quarter of this year and the year-ago quarter-the JV has some ground to cover in the market-share department. It shipped 25 million units last quarter for 9% global market share. Motorola, the next vendor above it, shipped 35.5 million units-about 40% more than SEMC-for its 13% share. Samsung Electronics Co. Ltd. shipped 37.4 million units for 13.7% share. Nokia shipped 101 million units to attain its 38% share.
“You need lofty goals,” said Chris Ambrosio, analyst at Strategy Analytics. “In fact, this has been a long-term goal that they’ve never given up on. I’m fairly positive on Sony Ericsson’s outlook. We’ve upgraded our forecast on them. Sony Ericsson is the fastest-growing vendor, in terms of volume.”
Strategy Analytics’ data showed that in 2006, SEMC shipped 75 million handsets worldwide and projected growth has the vendor shipping 115 million units this year and 136 million next year. Ambrosio called the 2008 projection “conservative, with upside.” If these projections hold, however, by the end of 2008, Sony Ericsson would remain in fourth place with about 11% market share, about 30 million units behind Samsung and Motorola at about 14% each.
Ambrosio said that while SEMC’s portfolio is “dangerously thin” on variety, the vendor has more than adequate products to compete across all price tiers. SEMC has strong support from Sony Corp. and its consumer electronics heritage and technical innovations from its other parent, L.M. Ericsson. But it needs to introduce single-chip technology to its offerings in emerging markets to cut costs and innovative software to compete with rivals. That means competing with Nokia, which rules the emerging markets and is driving its innovations down into entry-level and first-upgrade offerings.
Building brand
Finally, Ambrosio said, the emerging market challenge goes beyond products to distribution and brand-building. While SEMC’s globalization of its public-relations efforts may contribute to building its brand, expanding distribution is spade-intensive, long-term work.
“It is going to be hard for SEMC to get to the No. 3 spot,” agreed Carolina Milanesi, mobile devices analyst at Gartner. “They do not play in CDMA and their position in North America is very weak. They are likely to increase their position in emerging markets as their portfolio expands in the mid- and low-tier, but that will not be enough to offset their performance in North America. A lot of work needs to be done.”
According to SEMC’s Wrigley, the company indeed is rolling up its sleeves.
“This goal has led to internal realignments to get scale and market share,” Wrigley said. “We need a global PR agency to coordinate our messages across all markets.”
That “realignment” meant, in part, eliminating the position of the company’s vice president for corporate communications in North America-the JV’s most challenging market-sidelining Cherie Gary, who left the company’s North American operations on Sept. 1. Gary was a nimble and capable face for the London-based JV. And SEMC’s move toward an extra layer between it and the market comes at a time when some companies, such as Qualcomm Inc., have declared that direct, in-house public-relations efforts better serve it in a rough-and-tumble market.
Wrigley added SEMC will seek to establish itself as a “thought leader” and would promote events outside the typical circuit of trade shows designed simply to sell handsets.
Gary quietly announced the news of her departure from SEMC to industry contacts last week, leading to the renewed focus on the JV’s plans. Wrigley said the company’s North American management team would otherwise remain unchanged.
