Sanyo and Nokia in mobile tie-up

TOKYO - Struggling Japanese electronics maker Sanyo Electric and Finland's Nokia plan to form a tie-up in the mobile phone business, an industry source says.

Sanyo and the world's largest handset maker have agreed to form a joint venture to develop and make mobile phones for the CDMA third-generation (3G) standard dominant in the United States and popular in parts of Asia, the source said.

The deal is expected to help cash-strapped Sanyo cope with hefty development costs for new phones while giving Nokia access to Sanyo's know-how in designing advanced handsets. It could also help Nokia in its efforts to crack the tough Japanese market.

"Sanyo is in a weak financial position and has a dwindling amount of money and resources to put towards developing new handsets. Joining hands with a strong player like Nokia would be a positive move," said UBS analyst Fumio Osanai.

Osanai said a joint venture could also help Sanyo by reducing its exposure to the volatile mobile phone market, which is marked by large swings in demand and prices. It might also boost Sanyo's battery sales.

Sanyo is the world's largest maker of rechargeable batteries and supplies lithium-ion batteries to Nokia and other major mobile phone makers. Batteries are among Sanyo's most profitable products and among only a few pockets of strength left.

Last year, Sanyo embarked on a sweeping restructuring plan, saying it would cut 15 per cent of its global workforce, close factories, halve its debt and streamline struggling business areas.

- REUTERS