STOCKWATCH Ericsson sharply higher on Sony negotiations

STOCKHOLM (AFX) - Shares in LM Ericsson AB were sharply higher in opening  trade following confirmation from the company that it is in negotiations with  Japan's Sony Corp regarding a possible merger of their respective handset  operations.       At 10.05 am Ericsson B was up 4 skr or 6.35 pct at 67 skr bid, while the  SX-General was up 46.10 points or 1.09 pct at 4,184.47.       Gunnar Andersson, Ericsson and telecoms analyst at Handelsbanken said  Ericsson-Sony partnership in the handset business makes good sense for both  sides.        "It looks like a good fit," he said.       "Sony has very strong consumer brands, and a strong background in audio,  video, gaming, memory sticks and data storage, all of which will be  increasingly important with 3G. They also have a strong presence in Japan,  which Ericsson lacks," said Andersson.        Ericsson meanwhile is seen by Andersson as providing platforms, volumes,  and most importantly strong relationships with operators, and a well  developed distribution network to Sony.       "Ericsson will bring a strong mobile phone platform, which Sony lacks,  long term experience in the GSM market, a mobile phone specific brand name  rather than the general one Sony has, and still despite recent problems,  comparatively good volumes," said Andersson adding:      "They also have excellent telecom operator relations, and distribution  channels."       However Andersson said he sees a slight risk as always with such ventures  over the cultural compatibility between the North European and Japanese  manufacturers.       Andersson added that clear ownership leadership by one party is  preferential in any venture.        "50-50 isn't the best route, one party needs to be in a position to  provide clear leadership," said Andersson, who suggested that Sony would be  the obvious candidate.			

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