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BARCELONA, Spain–Sony Ericsson wants to be the No. 1 Google Android handset maker in the world. And it needs a strong foothold in the U.S. market to make that goal a reality, said company CEO Bert Nordberg.
Sony Ericsson
Sony Ericsson, a joint venture between Japanese consumer electronics maker Sony and Swedish telecommunications equipment maker Ericsson, has been on the mobile phone scene for about a decade. The company has mostly concentrated on delivering high-end phones to the European and Asian markets. But it’s never had a strong presence in the U.S., which has helped keep its overall market share in the bottom half of major handset providers.
But Sony Ericsson has bigger ambitions. CNET sat down with Nordberg on Sunday on the eve of the GSM Association’s Mobile World Congress to hear how the company plans to become the No. 1 Android device maker. Nordberg talked about Sony Ericsson’s highly anticipated Xperia Play, dubbed the Sony Ericsson PlayStation phone.
The phone, which is based on Google’s latest Android software and was introduced tonight at Sony Ericsson’s press conference, will become its flagship smartphone in the U.S. market. To generate buzz ahead of the launch, Sony Ericsson ran an advertisement during the broadcast of the Super Bowl. And according to Nordberg, it worked. He wouldn’t say how much the company spent on that ad. But he said the CEO of a major U.S. carrier called him directly to ask when his network could get the new phone.
“It was the first time we had a Super Bowl ad,” he said. “But it was money well spent.”
Nordberg also shared some candid opinions about the deal announced last week between rival handset maker Nokia and Microsoft. And he discussed the importance of Sony Ericsson cracking the U.S. carrier market. Below is an edited excerpt of the conversation.
CNET: Before we talk about Sony Ericsson’s big news, let’s discuss the newly announced Nokia-Microsoft partnership. Last week, Nokia announced that it will use Microsoft’s Windows Phone 7 operating system as its primary OS. What does this mean for Sony Ericsson?
Nordberg: Well, it’s clear that our focus is on Android. It’s where our focus has been this past year. And we will continue that. In fact, we plan to double the number of Android phones in the market this year. It’s an ongoing journey, but we like our position in the Android ecosystem. And we’ve made big contributions to the open-source software.
We think the Nokia news is quite interesting for others, especially those who have invested in the Windows Phone 7 ecosystem.
CNET: But Sony Ericsson has supported the Microsoft mobile platform in the past. Does this mean that you aren’t going to be a Windows Phone 7 supporter?
Nordberg: We are not big supporters of the Microsoft platform. It’s not a big part of our strategy, so it’s not really an issue for me. But for companies that have invested a lot in Windows Phone 7, they have to ask if Nokia will get an advantage that will change the game.
That said, as a European I think it says a lot about where the industry is going. It looks like the last stronghold in Europe in mobile has moved to the West Coast of the U.S. The U.S. is taking over. They are first with LTE. So much of the OS innovation is happening there. It’s obvious that it’s more important to come from the Internet world than from the mobile world. And that is why California is so important.
CNET: Nokia is still the world’s largest maker of cell phones. From a competitive standpoint are you still worried about them?
Nordberg: I was worried about them more before their announcement with Microsoft. It’s probably going to work out better for us. They would have had a greater impact on us if they had gone with Android.
CNET: Speaking of Android, how can you as a handset maker differentiate your product on Android, when so many of your competitors are also using the software?
Nordberg: That is the trick. We can build beautiful phones that connect to the living room, because we are partly owned by Sony. So we can connect to TVs. We have better screen technology, better cameras. And then our other parent is Ericsson, which owns the network. So we know about changes and features for the fastest speed networks. Ericsson has a very strong network patent portfolio, and we can leverage the ecosystem for those network technologies to get good margins.
CNET: So hardware is where you see Sony Ericsson differentiating itself?
Nordberg: Yes, that is where we can offer innovation by merging products and platforms, like the Sony Ericsson PlayStation phone. And we also have big ownership in content: movies, music, and TV programs. So we have a strong relationship there as well.
CNET: Upgrades to Android come out so quickly. What is the strategy for supporting all these different versions of software? That must create a bit of a problem in terms of how long you can support a particular phone.
Nordberg: Upgrades in the mobile market have become a lot like the computer industry. The upgrades are coming rapidly. And it really changes the nature of the industry. Mobile phones used to be phones with computers built into them. But now that’s changing. They’re now computing devices with a phone. That’s why so much of the development has gone to the West Coast in the U.S. And it’s why we are working so closely with Google.
One of our competitors has said they will support upgraded software for up to two years and then cut if off. We haven’t set specific timing on this. That’s difficult to do. But because the chipsets get upgraded every three years, it means that after three years some CPUs won’t be able to run the software of today. So I think two years is not too bad a strategy when you are talking about supporting software upgrades.
CNET: You just announced the Xperia Play smartphone tonight, which has been dubbed the Sony Ericsson PlayStation phone. It’s one of the first iconic devices from the company to launch in the U.S. And it’s the first device you’re selling on Verizon Wireless. Why the U.S. and why Verizon?
Nordberg: We’ve always launched products in Europe and then the U.S. But we’ve learned that the U.S. won’t take a device unless they’re first. So the strategy has turned around. As I said before, we’re seeing a lot of activity in mobile happening in California now. It’s why we moved our CTO and chief creative team from Europe to the U.S. So I now have two executive teams reporting to me from California. This is not a joke. Operators in the U.S. know we are serious about this market and we’re coming to them.
CNET: So why launch with Verizon Wireless first? You’ve offered other Sony Ericsson devices on GSM carriers in the U.S., such as AT&T and T-Mobile USA.
Nordberg: Verizon Wireless is such a big player in the U.S. market, so it’s become very important. And also Verizon is a great company with a good network. It doesn’t mean that they will be alone in offering this device. We’re not big on exclusivity. So I think we should remain open.
CNET: Some handset makers have lamented about how difficult it is to get into an American carrier. What’s your take on this?
Nordberg: They (U.S. operators) have 23,000 different things you have to do be allowed on their networks. So it’s damn difficult to get in there. There is a lot of coding and special adaptation that needs to be done. And they only accept very good phones in the network. But once you get in, the investment is done. So we hope that is step one.
CNET: As you’ve stated, it’s not easy to break into a U.S. carrier. So how did you do it with Verizon?
Nordberg: One of our parent companies is Ericsson, and that’s how we got in. Ericsson sells LTE gear to Verizon. And Ericsson also bought some networking businesses from Nortel, which also sold to Verizon. So we could build a relationship from that. Then we started to show them the phones. And they loved the Xperia Play.
CNET: Some people say that CDMA is a dying technology. And Nokia has chosen to essentially ignore the CDMA market. Once LTE is deployed, there won’t be the need for CDMA or even older generations of GSM technology. But with the Sony Xperia Play, you are expanding your CDMA product portfolio to support devices on Verizon. How important is it for you to support CDMA, especially in the U.S.?
Nordberg: All CDMA customers will evolve into LTE customers. HSPA customers will also become LTE customers. And then the technologies will merge. But that hasn’t happened yet. And it will take some time. So we could wait and introduce LTE devices. But why would we? Some U.S. carriers are still dependent on the CDMA technology. We want to work with them now as they are in transition. There is a big race to 4G. And we are well-placed because Ericsson is building these LTE networks. So I expect we will have an advantage in that.
CNET: The smartphone market is so competitive these days. And Sony Ericsson is not in the top three of handset makers worldwide. What is your goal for the company going forward? Do you hope to be one of the top handset makers?
Nordberg: We want to be No. 1 on Google Android.
CNET: Do you mean No. 1 on Android in the world or in the U.S.?
Nordberg: Yes, in the world. Last year, in nine months, we took 14 percent market share in Android worldwide. And we only had four devices. It could have been better. But I’d say that’s not a bad start. We are definitely the No. 1 Android player in Western Europe. But we can’t be No. 1 in the world without the U.S. We need to get into the U.S. market. And we think we need 25 percent of the market to be No. 1 in the world. We are already No. 1 in Japan and Sweden.
CNET: Motorola already has a strong Android brand in the U.S., particularly on Verizon’s network. You will now also offer some Android phones on Verizon. How much of a threat is Motorola to your plan to be No. 1 in Android worldwide?
Nordberg: Motorola has a similar strategy with Android that we have. In the U.S. they are very strong. But the difference between us and them is that over 70 percent of their business is in the U.S. Right now, we are limited in the U.S. So we can only do better in the U.S. Motorola is strong where we are weak, and we are strong where they are weak.
CNET: Verizon Wireless is launching a lot of very cool new phones this spring. It just launched the Apple iPhone. Neither Apple nor Verizon have released sales figures yet, but Verizon has said that presales of the device were stronger than in previous device launches. How will the Sony Ericsson Xperia Play compete against the Apple iPhone?
Nordberg: I think our phone addresses a different segment of the market. I expect the iPhone will do well. But we will be targeting different customers. We offer a different proposition. This is a gaming and entertainment device. I’d show how some of the games work, but honestly, it’s targeted to a much younger consumer. Besides I have three daughters. And unfortunately they were into horses much more than they were into games.
