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Howard Stringer Takes Charge At Sony Ericsson

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Is Sony slowly taking the reins of power at unprofitable joint venture Sony Ericsson? On Monday, Howard Stringer Howard Stringer , who has headed the Japanese electronics icon since 2005, revealed he would replace his counterpart at LM Ericsson as chairman of Sony Ericsson. It wasn't the only change announced on Monday: Dick Komiyama, chief executive of Sony Ericsson, will also be replaced by Ericsson's Bert Nordberg. But there's clearly a sense that the power balance is shifting in favor of Sony, as mobile handsets become less clearly linked to Ericsson's primary business of rolling out telecommunications networks.

A full-on withdrawal of Ericsson from the 50-50 joint venture may still be far off, given the lack of appetite in the current environment for its 50% stake, but it's hard to see how Ericsson could justify maintaining its investment in an unprofitable handset manufacturer through 2010. The Swedish company does have a division producing mobile-platform technology, including mobile modems, but it has broadened its customer base outside of Sony Ericsson by joining up with Franco-Italian chipmaker STMicroelectronics . (See "ST-Ericsson Aims At iPhone, BlackBerry.")

Sony , meanwhile, has the opportunity to further leverage its gaming, audio and video brands through Sony Ericsson handsets, and also through its "Play Now Arena" download service. Sony's Stringer will no doubt oversee an expansion of services and applications once he takes his seat as chairman, as well as the more immediate task of restructuring measures: Sony Ericsson said in April it would cut an additional 2,000 jobs after revealing a first-quarter loss, and subsequently reported another loss in July.

"Sony Ericsson is far more important for Sony than it is for Ericsson, long-term," said Geoff Blaber, an analyst with CCS Insight. "Given the situation that Sony Ericsson is in at the moment, and the fact that it's likely to require more funding to commence this turnaround of the business, it makes sense that Sony really begins to integrate it more broadly into the Sony business."

LM Ericsson 'B' shares fell 1.2%, to 66.40 Swedish kronor ($9.07), during afternoon trading in Stockholm on Friday. They outperformed the technology sector, down 2% in Europe, on a day marked by profit-taking across all sectors.

Gartner analyst Carolina Milanesi said the management shake-up was an "encouraging move," particularly as outgoing CEO Komiyama never seemed to "feel" the company as his predecessor Miles Flint seemed to have done. But she said competition would be tough for Sony Ericsson going into 2010, despite the manufacturer's forthcoming new phones, including the "Saito"--a 12.1 megapixel-camera-toting handset that will hopefully boost Sony Ericsson's crumbling profit margins.