Sony buys Ericsson out of mobile phone venture

by Tarmo Virki, Reuters

Posted at Oct 27 2011 05:28 PM | Updated as of Oct 29 2011 03:17 AM

Sony Corp. is to buy full control of the Sony Ericsson mobile phone venture from its Swedish partner as it seeks to boost its consumer products offering and to catch up on smartphone and tablet makers such as Apple and Samsung.

The 1.05 billion euro-deal ($1.45 billion) gives Sony ownership of certain handset patents held by Ericsson and will enable it to integrate the joint venture's output with its own range of products and online content.

Until now Sony's tablets, games and other consumer electronics devices have been kept separate from the phones sold by Sony Ericsson.

"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," Sony's chairman and Chief Executive Sir Howard Stringer said in a statement.

A buyout by Sony had long been talked of, and a source with direct knowledge of the matter told Reuters this month that a deal was in the offering.

"Sony now has all the components to compete with Samsung and Apple. The big question now is ... can it execute?" said Pete Cunningham of industry consultants Canalys.

"Based on history I am skeptical but I would not say it cannot be done," he added.

Founded in 2001, Sony Ericsson initially thrived with an array of camera and music phones, but later lost out in the smartphone race.

"Sony had to make this deal as it had run out of options, but integration challenges could prove to be a major hurdle," said Ben Wood, head of research at London-based mobile consultancy CCS Insight.

"As a major consumer electronics player lack of mobile assets had become a liability for Sony, particularly when compared with Samsung, whose telecommunication business creates nearly half of its profits," Wood said.

Ericsson said the deal provides Sony with a broad intellectual property cross-licensing agreement covering all the Japanese company's products and services as well as ownership of "five essential patent families relating to wireless handset technology."

Shares in Ericsson, whose main strength lies in its wireless network equipment business, were up 5% at 70.1 euros by 0813 GMT (4:13 a.m. EDT).