Sony moving into U.S. cell phone market

Sony spokesman Mack Araki said Wednesday that the company is planning to sell cell phones in the United States through its recently announced partnership with handset maker Ericsson.

Araki said Sony's new battle plan, such as how it will be organizing the joint venture or its business plan, will not be released yet. Even when the new company, called Sony Ericsson Mobile Communications, will offer the phones is being kept under wraps. But Araki did reveal that one of the target markets is the United States.

"They will probably come in with guns blazing and cell phones ringing," said Paul Dittner, a wireless analyst with Gartner Research. "They really weren't much when they were here before."

Sony's absence from the lucrative U.S. market has been a mystery for many in the wireless arena. The last time Sony tried to take on the U.S. cell phoning public it failed. Sony partnered with handset chipmaker Qualcomm in 1999, but the effort was abandoned because, in part, the company may have underestimated the amount of competition there was to sell phones in the States, according to industry sources.

For the next two years, it stayed out of the American cell phone market, even though some of its phones are among the biggest sellers in countries like Italy and other Western European nations. Sony stood on the sidelines while companies like Siemens, the European handset powerhouse, marched into the United States and took over the No. 3 handset selling slot in the world.

Compounding the mystery is that the United States market is still relatively untapped. The Cellular Telephone and Internet Association estimates there are 121 million wireless subscribers in the United States, meaning about four out of ten U.S. residents have a cell phone. By comparison, between 70 percent and 80 percent of the population in many Western European countries owns a cell phone.

Analysts say the move by Sony was inevitable and comes at perhaps the right time as carriers Sprint and Verizon claim they will, by year's end, turn on new cell phone networks that will let wireless users do things like download music onto cell phones, or other functions previously reserved just for personal computers.

Dittner says one of the biggest issues is if Sony intends to take advantage of the warehouse of recordings that one of its subsidiaries, Columbia House, sells to the public. Downloading music onto cell phones is expected to help replace some of the revenue carriers have lost as the price of a cell phone call has dropped to new lows.

Timing is also key, Dittner said. Most high-speed networks, which will let cell phone users download music or send e-mails with attachments, won't be launched until year's end at the earliest, with full national coverage sometime in late 2002 or even 2003. That could give the new partnership enough time to develop a new phone, test it in the United States, and then begin selling it in time to take advantage of the expected rush to buy phones that can access the new networks.

"What we've said this partnership does have is the potential to make an impact if they are capable of doing these things: leverage other applications, kind of really get into data use for consumers," Dittner said. "It also has the potential to be an enormous flop. They have some pretty significant issues for them to address, especially when they will get the product out and to market."

Sony has a well-known brand name, and Ericsson, while losing ground in the handset market, still makes a relatively good product, analysts say. The partnership, if done right, could pose a serious challenge to the likes of Nokia and Motorola, which sell tens of millions of phones in the United States every year.

"Sony has consumer electronics, probably the most important part of expertise to have," said Robin Hearn, a wireless analyst for industry watcher Ovum. "It's about screens, buttons, radio technologies, or chipsets. They may have seen the light before anybody else."

Several handset makers, such as Motorola and Nokia, were contacted for comment on Sony's intentions but declined the opportunity.

Sony pulled out of the United States market in 1999, when it reorganized its wireless phone business. At the time, it was doing business in the United States, Asia and Europe. On each continent, Sony was conducting research and development, engineering, sales and marketing.

But on July 7, 1999, the company announced a reorganization. It discontinued its engineering, sales and marketing teams for wireless phones in North America and opted to focus most of its sales efforts in Asia, Europe and the Pacific Island nations like New Zealand and Australia.