Ericsson Targets Direct Sales With PDA/Phone

By Joseph Palenchar -- TWICE, 2/26/2001

RESEARCH TRIANGLE PARK, N.C. -Remember when wireless phones were sold without subsidy locks? Remember when most retailers didn't have to buy their phones from carriers?

Those days are coming back, although in a very limited way, with Ericsson's launch of the long-awaited R380 smartphone, based on Symbian's Epoc operating system.

Initially, Ericsson is targeting direct sales of the device to retailers, e-commerce sites, Ericsson's own online store, and for redistribution to wireless application service providers (ASPs) and business-to-business marketers, said sales director Jeff Horton.

The strategy will prelaunch the product, which will be made available later to carriers for locked, subsidized resale, he said. One of the first retailers to offer the unlocked version will be Staples.

"This is a break in precedent," said Horton. "It's not the high-volume path, and we're still ramping up production," but the strategy will enable Ericsson to garner the "highest margin" because of the product's perceived benefits.

By selling a phone lacking a particular carrier's subsidy lock and service provisioning, Horton said, Ericsson "creates an opportunity for application service providers to take it to a major corporation so Symbian can penetrate their firewall." On the other hand, if a carrier provisions the phone, "they might provision it for use through certain portals, affecting the ability to go through a firewall."

When carriers buy GSM phones, "they want the SIM lock and a WAP gateway to be provisioned to their network," he continued. "It might not let you get through a firewall or through a third-party gateway."

Ericsson is also working with business-to-business marketers to develop business applications that could reside on the device.

John Althoff, sales and marketing head for Ericsson's Communicator products, pointed out that the company will market direct only with the approval of carriers who have already tested the product on their networks. "We have to wait for carriers to fully bless the product," he said.

When production ramps up and carriers determine their own marketing plans for the R380, Althoff expects carriers to buy locked and provisioned phones and market them through their direct and indirect channels at a subsidized price.

"Early on in the first few months," he said, "you'll see the R380 at retail at a higher price, and then as the year goes on, it will be distributed to carriers who could subsidize it [in direct and indirect channels]," thus making it available to a broader demographic.

Individuals or corporations interested in the R380 and its PDA features are "high-end users more interested in functionality than price," Althoff said, so an unsubsidized price isn't likely to be a major sales deterrent.

On its website, Ericsson prices the GSM 900MHz/1.9GHz device at an unsubsidized $599.

As more smartphones and combination PDA/phones become available, Althoff said, direct sales of unlocked phones by manufacturers could become more commonplace.

"Mobile Internet devices in general will probably call for a paradigm shift," he said. "As more of these devices are loaded with select applications to satisfy the needs of particular customer segments, why should a carrier inventory them, hope they sell them, and then customize them? It's a bigger financial risk for the carrier," especially given the higher price of smartphones compared to regular phones.

Customization could include setting the default WAP browser to a particular company's Intranet/Extranet address and embedding a user's password and secure ID in the product to penetrate the company's firewall, Althoff said.

Shaped like a traditional phone, the R380 features a keypad that flips open to reveal a wide horizontal touch screen that offers Jot handwriting recognition. PDA functions include address book, calendar and e-mail.

It also features a touch screen to launch applications and commands, a virtual onscreen keyboard, WAP-compatible microbrowser, and voice recognition to enter data into applications or to create an e-mail message.

At 5.8 ounces, its lithium-ion battery delivers 290 minutes of talktime or 107 hours of standby. It synchronizes with such desktop PIMs as Microsoft Outlook, MS Schedule+, MS Exchange, Lotus Organizer and Lotus Notes.