In the present times, mobile phones have turned in to highly functional gadgets, which can perform more than one task in a simplified manner. It has come a long way since the times, when these were used only for conversing or exchanging messages. Nowadays, you can do very many things with a mobile phone handset. [...]
Ericsson is putting its wireless microchip business into a joint venture with its Franco-Italian rival STMicroelectronics as the companies look to expand their customer base in the face of slowing mobile phone sales.
The new business, which will be jointly run by the two firms, will be number three in the mobile chip industry behind the US leaders Qualcomm and Texas Instruments. Based in Geneva, the as yet unnamed venture will employ nearly 8,000 people in a unit that last year would have generated $3.6bn (£1.9bn) in revenues.
The deal was warmly welcomed by Nokia, one of the venture’s key customers, as “a positive move” that would create a “strong industry player”. Analysts, however, pointed out that the Finnish firm, which makes four out of every 10 handsets sold worldwide, is no fan of Qualcomm, having been embroiled in bitter legal disputes with the US firm, and a stronger European rival would suit the company.
Ericsson is putting its mobile platforms business, which specialises in modems and designing multimedia phones, and $1.1bn in cash into the venture. STMicroelectronics, created just last month through the merger of STMicro’s mobile phone chip business with NXP Semiconductors of the Netherlands, will put in its wireless chip-design business, worth an estimated $1.2bn.
The venture will supply chips for handsets ranging from bottom-of-the-range pre-pay phones to the next generation of internet-enabled multimedia devices. As well as Nokia, the new venture will count SonyEricsson, Samsung, LG and Sharp as its major customers. The only one of the top five handset makers the venture does not supply is the US-based Motorola.
Ericsson’s chief executive, Carl-Henric Svanberg, will be chairman of the board of the business and STMicroelectronics’ chief executive, Carlo Bozotti, will be vice-chairman.
The deal comes as sales of mobile phones begin to show some signs of slowing down and there is consolidation in other parts of the industry. Last month, for instance, Nokia took control of the British mobile phone software company Symbian. Nokia helped create the business, with the UK-based Psion, 10 years ago.
Yesterday’s deal will allow Ericsson to focus on its telecoms networks business, which has suffered as the credit crunch bites and operators rein in spending.
Analysts warned that the venture could be bad news for the UK-based Arm Holdings, which designs processor chips for mobiles. Nick James at Panmure Gordon said the deal - along with STMicro’s acquisition of NXP - represents “a pretty intense wave of consolidation”.
Though the deal does not directly challenge Arm’s position as the dominant processor architecture for mobile phones, he said, “it does reduce the number of potential licensees and may put further pressure on Arm’s licensing revenue.”
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Late Friday, the news broke that Motorola was suing a former sales executive who had left Motorola and joined Apple in April. Motorola is claiming that he was sharing Motorola’s trade secrets with Apple. Of course, given the directions both companies seem to be heading in with their mobile phone devices, one might think that the only “secrets” he might have shared from Motorola were about what not to do. In fact, it seems like a lot of Apple’s success with the iPhone has been in ignoring many of the old rules.
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Nokia moved to counter the growing threat of Apple and Google in the race to supply the next generation of mobile phones by taking control of the British software company Symbian yesterday and announcing plans to make its mobile phone software free of charge.
Symbian, which Nokia helped create with the UK-based Psion 10 years ago, makes the operating system software that sits on so-called smartphones, handsets that can access the internet and play music. As mobile phones become more powerful and people do far more than just make calls and send texts, the software that powers these devices has become a crucial battleground.
Symbian has about 60% of the global smartphone market with its technology in more than 200m handsets already. But the recent entrance of Apple into the market with the iPhone and plans for Google to do likewise with its Android operating system later this year have threatened the positions of Symbian and Nokia, which makes four out of every 10 phones sold worldwide.
Kai Öistämö, Nokia’s vice-president, insisted that the company’s move, which has been under discussion for several months, had nothing to do with the threat posed by Google or Apple. “Looking at this as a response to anybody would not do any justice to the boldness and magnitude of what we are doing.”
Analysts were in no doubt about the Finnish company’s motivation: to prevent Google’s Android operating system, due to appear on phones towards the end of the year, grabbing a significant slice of the market. Nokia’s plans to stop charging for operating software also pose a threat to Microsoft and the BlackBerry developer, Research In Motion.
Nokia is spending €264m (£209m) on the 52% of Symbian it does not own and bringing on board its 1,600 staff - more than 1,000 of which are in London and Cambridge. Ericsson, which has 15.6% of Symbian, Sony Ericsson, with 13.1%, Panasonic, with 10.5%, and Siemens, with 8.4%, have already agreed to sell. The last remaining shareholder is Samsung and Nokia expects the Korean firm also to sell its stake. Nokia then plans to integrate its own smartphone operating system - called Series 60 - with the UIQ standard developed by Motorola and Sony Ericsson and the MOAP platform of Japan’s NTT DoCoMo. It will roll together all these systems, in the form of about 10m lines of computer code, into one free-of-charge software product that is “open source”, or accessible to all, within two years.
That new product will be controlled by a non-profit organisation called the Symbian Foundation, which already has more than 20 members including Vodafone, Orange, Nokia, Samsung and LG. All members will be able to use the new operating system to install on handsets or develop applications free of charge.
Many mobile phone firms complain that the sheer number of operating systems makes it very hard to develop new revenue-generating services.
Setting up the foundation means Nokia will be abandoning hundreds of millions of pounds of software-licensing revenues. Symbian alone made £160m last year by charging mobile phone makers for its software. For Nokia, however, the ambition is to make it as easy as possible for engineers to develop applications for the new system, which will make Symbian handsets more attractive to consumers and consequently to mobile phone companies.
“I am convinced this will lead to us selling more phones,” said Öistämö.
Symbian’s chief executive, Nigel Clifford, described the creation of the Symbian Foundation as “epoch-making”. Analysts said it would also frustrate Google, whose Android system is also “open source”.
Emeka Obiodu, at the industry analysts Global Insight, said Google’s plans had been “fatally derailed” by Nokia’s move.
“Nokia is taking the fight to Google on its own terms,” he said. “Google prides itself on open-source credentials and is eager to build up a coalition of industry players to push through with its agenda (which is to cultivate a viable platform for mobile advertising). However, Nokia has nipped that in the bud.
“By tying up the top five mobile handset makers, key chipmakers and the likes of AT&T and Vodafone, Nokia wants to starve Android, and similar initiatives, of influential industry players, leaving them to toy around with smaller players with lesser chance of changing the status quo.”
It will also be a blow to Microsoft, which has toiled for most of the past decade to get into the mobile phone market and now faces the prospect of its main rival becoming free of charge. Microsoft’s Windows Mobile operating system has only 13% of the market and costs handset makers $8 to $15 a phone to use.
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Motorola isn’t having an easy time in the mobile phone arena at the moment.
Back in February it announced that due to declining sales it could walk away from the market altogether, then in March instead confirmed that it would split its business into consumer handhelds and broadband and mobile solutions.
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Skinny phone fanatics, pay attention! Motorola has just released details of the new RAZR 2 mobile phone.
No doubt hoping for the same measure of fervour that greeted the first one, the RAZR 2 is slimmer and stronger and will come with up to 2GB of internal memory. For instance, the old hinge, which presented a few, er, reliability issues for owners, has been replaced with a new hinge that has undergone 100,000 flips under lab conditions.
The phone is 2mm thinner than the original RAZR, has a hardened steel frame and dual screens (2in and 2.2in). Powered by the ARM II processor, it’s 10 times faster than the original and the inclusion of USB 2.0 means transferring songs takes a few seconds. The 2GB of storage is good for around 1,000 songs.
There are three models in the new family: the V9 (3G HSDPA), V9m (EVDO CDMA) and V8 (GSM), while some will run the Linux/Java operating system. Due to land in July.-Martin Lynch
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