Sony Buys Out Ericsson, Gains Control of Smartphone Business

Oct. 27, 2011
The move comes as Sony's competitors such as Apple and Samsung Electronics forge ahead with closely coupled strategies for smartphones and tablet computers.

Electronics giant Sony said on Oct. 27 that it would buy out its Swedish partner Ericsson from their mobile phone joint venture. "Sony will acquire Ericsson's 50% stake in Sony Ericsson ... making the mobile handset business a wholly-owned subsidiary of Sony," the two companies said.

The deal calls for Sony to hand over 1.05 billion euros (US$1.47 billion) in cash to the Swedish telecom equipment maker in exchange for half their joint venture, as well as all related patents and licences.

The deal, which still needs regulatory approval, is expected to close by January 2012.

The Japanese-Swedish group was created in 2001, combining the then unprofitable handset operations of Ericsson and Sony to today become the sixth-biggest player in the global market.

While hailing the past decade's partnership with Ericsson, Sony CEO Howard Stringer pointed out that the market had drastically shifted since 2001 from focusing on loss-making simple mobile phones to highly profitable smartphones.

The separation from the Swedish company was therefore a logical and strategic step that would enable Sony to more efficiently deliver devices that can connect to each other and open up new entertainment possibilities, he said. By taking full control, Sony can integrate its smartphone operation with its tablet, hand-held game console and personal computer businesses to save on costs and better synchronize development of mobile devices.

The move comes as Sony's competitors such as Apple and Samsung Electronics forge ahead with closely coupled strategies for smartphones and tablet computers. Analysts say the move would help accelerate Sony's efforts to push its vast library of content through its game consoles, smartphones and tablet computers to face up to competition from Apple's iTunes and App store.

"The transaction gives Sony an opportunity to rapidly integrate smartphones into its broad array of network-connected consumer electronics devices -- including tablets, televisions and personal computers," Stringer said.

Last year, Sony Ericsson posted a net profit of 90 million euros, compared to a net loss in 2009 of 836 million.

By the third quarter this year, touch-screen smartphones accounted for 80% of the joint venture's sales.

Next year, when Sony Ericsson is expected to change its name to reflect the shift, such handsets should account for all sales. Ericsson meanwhile also described the deal as logical, since it aims to concentrate on the wireless market as a whole.

"We will now enhance our focus on enabling connectivity for all devices, using our R&D (research and development) and industry leading patent portfolio to realize a truly connected world," said Ericsson CEO Hans Vestberg.

The two companies meanwhile said they would continue working together, announcing they had set up a "wireless connectivity initiative ... to drive and develop the market's adoption of connectivity across multiple platforms."

The announcement followed weeks of rumors Sony was looking to buy out Ericsson from the joint venture and analysts said they were not surprised, with the terms in line with expectations. Canalys analyst Pete Cunningham said the deal in fact was "the only feasible option."

"If nothing had happened, Sony Ericsson would most probably have died in the next 18 months due to problems it has had to differentiate its handset products," he said. "With the acquisition, Sony now has all components to compete directly with Apple and Samsung."

Copyright Agence France-Presse, 2011

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