Sony-Ericsson is a joint party that has been established in 2001. It is founded by the Japanese Consumer Electronics Company-Sony Corporation and the Swedish Telecommunication Company-Ericsson to create a new trend of mobile phones. They both stopped in making their own mobile phones.
Sony Corporation, as we all know, is a very large company known for their products. Many consumers prefer their products because of its quality. They already gain the reputation in making and innovating new gadgets. They are known in every aspects of technology like in audios, videos, televisions, information communications, semiconductors, and electronic components.
Ericsson, on other hand, is well known for their technological advancement in communication. They will ensure that the consumer really gets what features they want. Examples of these leading technologies are IP multimedia subsystem (IMS), multimedia sending (MMS), diameter base protocol, service deliver platform (SDP), and wireless application protocol (WAP). The reason for this merge is to combine the expertise of Sony in consumer electronics with the technological leadership of Ericsson in the communication sector.
Sony-Ericsson already attained 43 percent of annual growth rate. In the third quarter of year 2006, Sony-Ericsson became the fastest-growing vendor of mobile phones. It leaves Motorola with an annual growth rate of 39 percent. As of today, Sony-Ericsson is the second to the Nokia for the most profitable mobile phone makers. They achieve this status because of its huge growth in high end handset market. The global management of the company is based on Hammersmith, London. They also conduct their researches and developments in India, United States, Netherlands, Canada, China, Sweden, Japan, and United Kingdom. Currently, Sony-Ericsson has 8000 employees worldwide. Their present president is Miles Flint and the Corporate Vice President is Anders Runevard.
Another mobile phone maker is the Nokia Corporation. Nokia Corporation is the world’s largest mobile phone manufacturer which has a global device market share of 36 percent in the first quarter of 2007. The company produces cellular phones for every major protocols and market segments, including Global System for Mobile communication (GSM), Code pision multiple access (CDMA), and Wideband Code pision Multiple Access (W-CDMA). Nokia Corporation also produces telecommunication network equipment for the applications like Integrated Services Digital Network (ISDN) broadband access, mobile and fixed-line voice telephony, wireless LAN, and the voice over IP.
Nokia Corporation is base on Espoo, Finland. It has many manufacturing and sales representation sites all over the world. They also have their industrial research laboratories that can be found on Helsinki, Toijala, Tampere, Beijing, Tokyo, Bochum, Budapest, California and Cambridge, Massachusetts. As of March 2007, the company already has 68,321 employees around the world. Their current president and chief executive officer is Olli-Pekka Kallasvuo and their chairman is Jorna Ollila.
Today, there are several companies that are competing to be the best in this industry. Some of these are Nokia, Samsung, Motorola, and Sony-Ericsson. They all want to be the greatest producer of mobile phones in the world. As the result of this competition, the technology level of this industry is very fast, thus making the value of the older model of mobile phone decrease dramatically.
When we look at financial information of Nokia Corporation in 2006, their revenue is 41.121 billion euro and their net income is 5.488 billion euro. We can say that the capital of this company is large because of the huge revenue and net income. Where did the capital come from? The answer is from shares and share capital. On December 31, 2006, Nokia Corporation has a share capital of 245,702,557.14 euro and the total shares issued were 4,095,042,619.
Last December 31, 2006, the total number of share included 129,312,226 shares which is owned by Group companies with an aggregate value of 7,758,733.56 euro. It represents approximately 3.2 percent of the total voting rights and the share capital.
During the first quarter of 2007, Nokia Corporation performance is very strong. According to the financial statement of Nokia for the first quarter of 2007, the mobile phone industry have produced 253 million units. Nokia has estimated device market share of 36 percent. It is the same level as of the fourth quarter of 2006. Nokia also have a gross of 33.1 percent which increases from 32.4 percent on the fourth quarter of 2006. The Nokia also release new model of mobile phones.
“I’m encouraged by Nokia’s first quarter 2007 performance. Our profitability was strong, with both gross and operating margins up sequentially, excluding special items. We also saw good year on year device volume growth that led to an increase in our market share, further solidifying our number one position in the industry” said Olli-Pekka Kallasvuo, CEO of Nokia Corporation. On March 31, 2007, Nokia Corporation and its sub companies owned 174,417,543 shares that worth 10,465,052.58 which are approximately 4.3 percent of the total voting rights and of all the shares in the company.
The whole industry and Nokia Corporation expects that the volume of industry mobile devices increases sequentially in the upcoming second quarter of the year. Based on the plans of the Nokia Corporation for the 2007, it is also expected that the device industry experiences value growth in 2007. Also, they expect that there will be a decline in industry because of the increasing impact of emerging market and competitive factors. They aim to have an increase in production this year.
Sony-Ericsson is proud of their performance in the first quarter of 2007. They achieved 63 percent increase in year-on-year volume and 47 percent sales growth rate. In the beginning of the first quarter, Sony-Ericsson expands its financial disclosure because of the company’s continuing growth and in taking the advice of parent companies. They acquire 254 million euro this year and increasing their unit shipped by 63 percent compared last year that gives them a very significant market share gain. “Sony Ericsson has made a very positive start to the year selling 63% more phones in the first quarter than a year ago.
The strong sales and solid financial performance demonstrate a continuation of the momentum we established last year. We have announced a number of exciting new products during the quarter many of which are already shipping and have been well received by consumers. The company continues to develop hit model products with a clear consumer proposition that appeals to operators, and then rapidly ramp-up volume to meet market demand,” said Miles Flint, President of Sony-Ericsson.
Not all companies like these two, guarantee to become successful. They also take several risks and uncertainties. Here are some risks and uncertainties the companies have to endure: 1) The competitiveness of the product portfolio; 2) their ability to identify key market trends; 3) the continuing growth of the mobile industry; 4) the risks of having the competition with other companies due to the discoveries of new technologies ; 5) the ability to manage the expenses needed by the company ; 6) the increasing number of competitor in the industry that may lead in the decrease of sales; 7) the risks of having sudden innovation of technologies and the ability to use it to comply what the market demands; 8) successful advertisement of complex technologies that is applied to new products;
9) the ability to protect complex technology which the company develops and claims; 10) the ability to protect the company’s product and technology from other participating competitors; 11) the ability to guarantee the safety, security and quality of the components; 12) the inventory management risk that results from shifting in market demands; 13) the ability to maintain acceptable prices when having an innovation for more better products; 14) the ability to integrate the operation, personnel and supporting activities of their respective businesses; 15) the risk of violating government laws by former employee of the company which lead to the transfer of violations to the company; 16) any impairment of the company’s customer relationship resulting from the government investigation involving your companies;
17) the risks of the development of large, long-term contract; 18) the risk in of economic and political problems in different countries where the companies usually do their business; 19) the success in collaboration arrangement relating to improvement of technologies; 20) the successful partnership of customer and supplier in financial condition; 21) the risks of having an interruption on information technology network wherein the operation of the company usually rely on; 22) the risks of fluctuating exchange rates, especially the currency your company is using, because the materials used is usually imported from other countries; 23) the management of the customers financing exposures;
24) the risks of accident that results from the recklessness of the company like possible health risks from electromagnetic fields cause by stations and mobile devices. 25) unfavorable outcomes of litigation; 26) the ability to recruit, maintain and train appropriately skilled employees: 27) the impact of changes in government laws, policies and regulation which may lead to different effects on the company.
Today is the age of information technology. It is predictable that there will be boom in this sector. The investors will invest to these companies to be able to have better profit. These companies will need large amount of capital to be able to compete in the global market. This means that there will be a high demand on investments, thus, the interest of every investment will increase. With this situation, we can now see that investors in the future will gain very much profit compared today.
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