After rumours hinting at the deal, Swedish telecommunications company Ericsson is pulling out of the Sony Ericsson joint venture formed ten years ago with Sony. Sony is to acquire its 50% stake in the company in a deal worth EUR1.05 billion (US$1.47 billion/AU$1.40 billion).
The deal is expected to close in January 2012, subject to regulatory and shareholder approval.
According to Ericsson’s press release, the deal will give 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 deal also will give Sony access to a broad patent licensing agreement with Ericsson’s technologies for all of its products and services. As well, it will have full ownership of five essential patent families relating to “wireless handset technologies”.
“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,” Sir Howard Stringer, Sony’s Chairman/CEO/President, said.
“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.”
The joint venture between Sony and Ericsson emerged when there was a fire in a facility in New Mexico in March 2000. This affected supplies of chips for phones for both Nokia and Ericsson, but Nokia was able to alternative supplies and Ericsson could not. Added with Nokia’s dominant market share, it became unviable despite being the third largest mobile phone manufacturer at that time.
Sony at that stage had less than 1 percent market share in 2000, but both decided to merge their companies together in 2001. However, that looked to be a major failure when market share fell but both parties remained committed. It continued to struggle until 2005 when they decided to push phones with Sony’s brands of Cyber-shot and Walkman. This continues to this day.
Sony Ericsson has since been a big partner, in addition to Samsung and HTC, for Google’s Android OS with its XPERIA line of phones since 2010. According to them, they hold 11 percent of total Android phones and that represented 80 percent of the company. However, the company still lags behind rivals Nokia, Apple and RIM.