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Sony Ericsson in entry-level tie-up

Leading mobile phone vendor Sony Ericsson will pitch its fortunes in the entry-level handset market after signing a licensing and original design manufacturer (ODM) deal with Sagem Communication.

Leading mobile phone vendor Sony Ericsson will pitch its fortunes in the entry-level handset market after signing a licensing and original design manufacturer (ODM) deal with Sagem Communication.

The two companies will conduct ‘joint development activities’ with Sagem providing the handset vendor with Sony Ericsson-branded GSM, GPRS and EDGE units.

“We chose Sagem Communication because its software platforms are mature, scaleable and flexible,” said Howard Lewis, vice president and head of product business unit entry and Sony Ericssson.

Both companies aim to optimise their combined areas of expertise to enhance Sony Ericsson’s position in the entry-level handset. The terms of the deals state that Sony Ericsson will open a research and development facility dedicated to entry-level devices near Sagem’s factory in Cergy, France.

“Our agreement is long-term and will highlight our future joint development efforts,” said Thierry Buffenoir, deputy CEO of Sagem Communication.

The move represents a significant diversification in Sony Ericsson’s strategy, as the joint venture between the respective Japanese and Swedish technology providers is more commonly associated with offering feature-rich handsets to the market, yielding high profit margins.

A recent report compiled by iSuppli claimed that Sony Ericsson enjoyed 46.5% growth, year-on-year in 2006, in terms of global handset shipments, and claimed its mid-to-high end handsets striking a chord with consumers was the chief factor behind the favourable results.

In addition, iSuppli claimed that Sony Ericsson was the fourth best-performing handset vendor, in terms of unit shipments, during 4Q 06. The research firm also stated that Sony Ericsson could potentially threaten Samsung’s position as the third-largest handset vendor in the global market.

The report highlighted that Sony Ericsson shipped 26 million handsets during the surveyed period representing a market share of 8.7%. In addition iSuppli claimed this figure was just 5.9 million units shy of Samsung's performance during 4Q 06, as the handset vendor garnered 10.7% of the global market.

South Korean vendors, LG Electronics and Samsung Mobile, are also rumoured to follow suit in the near future according to press speculation.

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