Oct 27 AT 8:53 AM Nick Gray 9 Comments

SONY announces €1.05 billion SONY Ericsson buyout plan

sony_Sir Howard Stringer

It looks like the end of an era is upon us. SONY made the announcement today that they have purchased Ericsson’s 50 percent stake of SONY Ericsson for a cool €1.05 billion. The SONY Ericsson joint venture was established on October 1, 2001, and was meant to give the company a competitive advantage by combining SONY’s consumer electronics expertise with Ericsson’s vast knowledge and patent portfolio related to the mobile phone sector. After a few good years in the mid 2000’s, SONY Ericsson’s market share dropped dramatically as the company struggled to produce phones that could compete with the iPhone and the first wave of Android devices.

SONY’s plan is to move away from low-end feature phones and focus more on high-margin smartphones. SONY will use “five essential patent families” to make sure they are well protected from the likes of Samsung and Apple. Over the past 18 months, we’ve seen a variety of Android powered handsets from SONY Ericsson hit the market, but CEO Sir Howard Stringer made it clear that SONY will be keeping their options open. During an address to the media, Stringer was asked if SONY would consider purchasing HP’s webOS, to which he replied, “Never say never.”

SONY and Ericsson are set to close on the buyout agreement in January 2012, pending regulatory approvals.  We hope that a refocused SONY will finally be able to capitalize on the company’s history of innovation and produce some new Android powered devices that can give Samsung and HTC a run for their money.

Do you think this is the right move for SONY to stay competitive in the mobile market? Will SONY ever be a leader in mobile development and innovation? Or are they destined to be a follower and continue to push out mediocre products with great design aesthetics?

Show Press Release

Ericsson: Sony to acquire Ericsson’s share of Sony Ericsson

October 27, 2011, 08:16 (CEST)

Sony Ericsson to become a wholly-owned subsidiary of Sony and integrated into Sony’s broad platform of network-connected consumer electronics products
The transaction also provides Sony with a broad IP cross-licensing agreement and ownership of five essential patent families
Ericsson to receive EUR 1.05 billion cash payment
Sony and Ericsson to create wireless connectivity initiative to drive connectivity across multiple platforms
Ericsson (NASDAQ:ERIC) and Sony Corporation (“Sony”) today announced that Sony will acquire Ericsson’s 50 percent stake in Sony Ericsson Mobile Communications AB (“Sony Ericsson”), making the mobile handset business a wholly-owned subsidiary of Sony.

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 – for the benefit of consumers and the growth of its business. 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.

As part of the transaction, Ericsson will receive a cash consideration of EUR 1.05 billion.

During the past ten 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.

“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,” said Sir Howard Stringer, Sony’s Chairman, Chief Executive Officer and President. Mr 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.”

“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” said Hans Vestberg, President and CEO of Ericsson.

When Sony Ericsson started its operations on October 1, 2001, it combined the unprofitable handset operations from Ericsson and Sony. Following a successful turnaround the company has become a market leader in the development of feature phones by integrating Sony’s strong consumer products knowledge and Ericsson’s telecommunications technology leadership. The WalkmanTM phone and Cyber-shotTM phone are well known examples.

With the successful introduction of the P1 in 2007, Sony Ericsson early on established itself in the smartphone segment. More recently, the company has successfully made the transition from feature phones to Android-based Xperia(TM) smartphones. By the end of the third quarter of 2011, Sony Ericsson held a market share of 11 percent (by value) in the Android phone market, representing 80 percent of the company’s third quarter sales. During its ten years in operation Sony Ericsson has generated approximately EUR 1.5 billion of profit and paid dividends totalling approximately EUR 1.9 billion to its parent companies. Prominent models include “XperiaTM arc” and “XperiaTM mini” which received 2011 EISA Awards, while recent notable additions to the lineup include “XperiaTM PLAY” and “XperiaTM arc S”.

The transaction, which has been approved by appropriate decision-making bodies of both companies, is expected to close in January 2012, subject to customary closing conditions, including regulatory approvals.

Ericsson has accounted for its 50 percent share in Sony Ericsson according to the equity method. Following completion of the transaction, Ericsson will have no outstanding guarantees relating to Sony Ericsson and will no longer account for Sony Ericsson as an investment on balance sheet. The transaction will result in a positive capital gain for Ericsson which will be defined after closing of the transaction.

SEB Enskilda is acting as Ericsson’s sole financial advisor in the transaction.

Via: Phandroid

Source: Engadget

Nick is a tech enthusiast who has a soft spot for HTC and its devices. He started HTCsource.com (the first HTC blog) back in 2007 and later joined the Android and Me family in the summer of 2010.

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