Sony-Ericsson: Another assault on Motorola

Sony-Ericsson has built itself into the world's fourth largest handset maker by marketing high-end phones. Most of its handsets have the ability to play music and take pictures. The company has done well enough. Net income in the last quarter doubled to $347 million.

But, the company understands that the market for expensive handsets is limited, especially in the largest markets like India and China. So, Sony-Ericsson is going "down market" to pick up sales. According to The Wall Street Journal "this year the company launched six basic handsets, including a stripped-down model without an FM radio or a camera that predominantly is aimed at newer markets such as India and Latin America."

Who gets hurt by the move? Nokia (NYSE: NOK), perhaps. It has the largest market share in places like India. It already has cheap handsets there. But, with 36% of the worldwide market, some of its sales could be picked off by a strong competitor.

The big loser is probably Motorola (NYSE: MOT). It still has not been able to get back on its feet after sales of its RAZR product began to decline in 2006. Its market share has dropped from about 22% to 15% and Samsung may have passed it for the number 2 spot behind Nokia. Now Sony-Ericsson, with 9% of the market, is trying to increase its footprint by marketing lower cost models.

Nokia and Sony Ericsson have very successful phones at the high end of the market. And Apple (NASDAQ: AAPL) is aiming there as well. It is becoming harder to see where Motorola will fit in.

Douglas A. McIntyre is a partner at 24/7 Wall St.