NEC, Matsushita Team Up on Handsets

Following a collaboration trend in the handset space, NEC Corp., Matsushita Electric Industrial Co. Ltd. and its subsidiary Matsushita Communication Industrial Co. Ltd. are forming an alliance to co-develop mobile handsets.

NEC and Matsushita, which sells consumer products under the brand name Panasonic, are the top two cell phone sellers in Japan, thanks to deals with leading Japanese carrier NTT DoCoMo Inc. DoCoMo plans to expand internationally through deals with AT&T Wireless and other companies, and this may help boost sales for NEC and Panasonic.

But in the current world market, the companies lag well behind leaders Nokia Corp., Ericsson AB and Motorola Corp.

“In the world of cellular phones, bigger is better,” said Ken Dulaney, an analyst at Gartner Inc., in San Jose, Calif. “Youve got to get up to a decent market share to really compete against Nokia. Outside of Asia, neither [NEC or Panasonic] has a substantial brand [for cell phones].”

The companies plan to cooperate on designs for common architectures for third-generation mobile handsets, develop phones that support streaming video and other multimedia applications, and cooperate on quality testing.

Quality assurance has become more of an issue as phones continue to support increasingly complicated applications. This year, DoCoMo had to recall Panasonics P503i Hyper phone twice, once because of a glitch that caused data to disappear and the second time due to a handset-specific problem that wouldnt let customers receive pages in certain geographical locations. DoCoMo announced that the latter problem was fixed last week.

Sony Corp. has faced similar recall problems—forced to pay millions when both DoCoMo and KDDI Corp. had to recall their phones.

Matsushita and NEC are considering various OEM agreements to supply second- and third-generation phones. They declined to say when new products would appear and what they would be.

The deal follows a similar one earlier this year in which Sony and Erics-son announced they will merge their handset businesses into a single company to capitalize on Sonys consumer brand and video expertise.