Sony, Ericsson in mobile tie-up

Ericsson said in January it would outsource production of its mobile phones

TOKYO, Japan -- Japanese digital appliance giant Sony Corp said on Thursday it was in talks on a tie-up with Sweden's Ericsson in the mobile phone sector.

Ericsson is the world's third largest mobile phone maker.

The companies have reached a basic agreement to form a joint venture in Britain and will announce the deal next week, public broadcaster NHK reported.

"Both companies are in talks about potential handset businesses, but nothing has been decided," Sony said in a statement.

The two companies would invest several hundred billion yen -- possibly several billion dollars -- and spin off their mobile phone businesses to form the joint venture, NHK said.

Ericsson announced in late January that it would fully outsource production and supply of its handset unit, which has been losing money since the second quarter of 2000.

Flextronics to take over handset manufacturing

Singapore-based Flextronics, a leading outsourcing equipment maker, would take over handset manufacturing while Ericsson would concentrate on development and marketing.

Analysts said that decision was not enough, and were hoping for a tie-up with another Asian handset maker adept at design, branding and innovation.

But Ericsson, which has a healthy infrastructure equipment business, said a month ago that it was not thinking of completely selling off its handset unit.

Shares in Sony were higher by 3.24 percent in early trade in Tokyo, mainly in line with the broader market. The Nikkei 225 index was up 3.17 percent, fueled by a rate-cut led rally in New York.

Reuters contributed to this report.

Sony
Ericsson
Flextronics

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