Swedish telecoms equipment maker Ericsson and Japanese electronics group Sony agreed on a joint venture today in a bid to revitalise their loss-making handset businesses.
The new venture, which is to start operating in October, will have 3,500 employees worldwide with facilities in North America, Britain, Sweden and Japan, Ericsson said.
It will launch its first products next year and also create a new brand.
Investors welcomed the widely anticipated deal, sending Ericsson's share price up nine per cent, outperforming the DJ Stoxx Tech index by more than four percentage points.
Losses at Ericsson's handset division have prompted some investors to call for the outright sale of the business, but Ericsson insists it needs to retain a presence in the sector to complement its network operations where it is the world leader.
To return to profit after losses in the fourth quarter of 2000 and the first half of 2001, Ericsson has said it would sack up to 22,000 people or one fifth of its workforce and save 38 billion Swedish crowns ($3.73 billion) annually from 2002.
Many industry analysts remain sceptical and expect Ericsson to end the whole of 2001 in the red.
Analysts believe an alliance with Sony will give Ericsson a badly needed partner to revive its loss-making mobile phone division and a foothold in the attractive Japanese market.
An alliance between Ericsson and Sony with its powerful brand name would turn the heat up on Nokia and Motorola, the world's number one and two handset makers.