Sony Corporation is to buy out Ericsson’s 50% stake in the two companies’ Sony Ericsson mobile phone joint venture. Ericsson will receive €1.05bn for its stake subject to approval by the relevant authorities. The company will become a wholly-owned subsidary of Sony and will be integrated into Sony's platform of network-connected consumer electronics products. The deal is expected to go through by January 2012.
The transaction also provides Sony with a broad intellectual property (IP) cross-licensing agreement covering all products and services of Sony, as well as ownership of five essential patent families relating to wireless handset technology.
Ericsson will be left to concentrate on its wireless transmission technology and infrastructure services portfolio. However, Sony and Ericsson will work together to create a wireless connectivity initiative to drive connectivity across multiple platforms.
Ericsson said in a statement that: 'During the past 10 years the mobile market has shifted focus from simple mobile phones to rich smartphones that include access to internet services and content. The transaction is a logical strategic step that takes into account the nature of this evolution and its impact on the marketplace.
'This means that the synergies for Ericsson in having both a world leading technology and telecoms services portfolio and a handset operation are decreasing. Today Ericsson's focus is on the global wireless market as a whole; how wireless connectivity can benefit people, business and society beyond just phones. Consistent with that mission, by setting up a wireless connectivity initiative, Ericsson and Sony will work to drive and develop the market's adoption of connectivity across multiple platforms.'
The move follows considerable market rumours recently that Sony was reviewing the 50:50 joint venture. Mobile phones fit well into Sony’s consumer electronics product portfolio, including tablets, televisions and personal computers.
Sir Howard Stringer, Sony's chairman, CEO and president, said: 'This acquisition makes sense for Sony and Ericsson, and it will make the difference for consumers, who want to connect with content wherever they are, whenever they want. With a vibrant smartphone business and by gaining access to important strategic IP, notably a broad cross-license agreement, our four-screen strategy is in place.
'We can more rapidly and more widely offer consumers smartphones, laptops, tablets and televisions that seamlessly connect with one another and open up new worlds of online entertainment. This includes Sony's own acclaimed network services, like the PlayStation Network and Sony Entertainment Network.'
Stringer also noted that the acquisition will afford Sony operational efficiencies in engineering, network development and marketing, among other areas. 'We can help people enjoy all our content – from movies to music and games – through our many devices, in a way no one else can.'
Hans Vestberg, president and CEO of Ericsson, said: 'Ten years ago when we formed the joint venture, thereby combining Sony's consumer products knowledge with Ericsson's telecommunication technology expertise, it was a perfect match to drive the development of feature phones. Today we take an equally logical step as Sony acquires our stake in Sony Ericsson and makes it a part of its broad range of consumer devices. We will now enhance our focus on enabling connectivity for all devices, using our R&D and industry leading patent portfolio to realize a truly connected world.'
Sony Ericsson was set up 10 years ago in October 2001 and rapidly made a name for itself, challenging market leader Nokia with camera phones, such as the Cyber-shot, and music phones, like the Walkman phone. However, in recent years it has seen its market share drop following the arrival of Apple’s game changing iPhone, which revolutionised the market.
The company suffered some well publicised faults on key devices in 2010, which hindered its attempt to make a real impact on the smartphone market. Its recent devices, including the Xperia Arc, have been well received, however.
In Q2 2011, Sony Ericsson was 10th overall for worldwide sales, according to Gartner, with 7.2 million devices sold and a 1.7% market share. This was down from 11 million devices sold and a 3% market share in Q2 2010.
By the end of the third quarter of 2011, Sony Ericsson held a market share of 11% (by value) in the Android phone market, representing 80% of the company's third quarter sales. During its 10 years in operation Sony Ericsson has generated approximately €1.5 billion of profit and paid dividends totalling approximately €1.9 billion to its parent companies.