Sanyo Cellular Is Sold To Kyocera For $375M

by Joseph Palenchar On Jan 28 2007 - 8:00am

Kyocera Corp. reached a definitive agreement to buy Sanyo's mobile phone business from Sanyo Electric as part of its strategy to build the telecommunications portion of its diversified $3.7 billion business empire.

The purchase, scheduled to take place April 1 at an expected cost of around $375 million, will build Kyocera's share of the wireless handset business in large part by tapping into Sanyo's expertise in developing and manufacturing mid- to high-tier phones, a Kyocera spokesman told TWICE. Kyocera's previous focus has been on low- to mid-tier phones, he said. Both companies market CDMA handsets and PHS-technology phones used in Japan and other parts of Asia.

"We're not doing this to cut costs," the spokesman said. "We can't say we'd never change the organization, but the focus of this transaction is the synergy available through technological development."

With that in mind, the company said it plans to offer continued employment to all affected Sanyo mobile employees, numbering about 2,000, "to ensure a smooth transition. As a result, in North America on April 1, Kyocera will create a new wholly owned Kyocera subsidiary that will assume the operations of the U.S.-based Sanyo business unit. It will operate separately from San Diego-based Kyocera Wireless "to maintain immediate continuity with its existing distribution network," Kyocera said.

For the "foreseeable future," Kyocera said it plans to offer both Kyocera- and Sanyo-branded products worldwide.

The acquisition will boost the companies' combined worldwide market share in CDMA handsets to 10 percent in third-quarter 2007 unit sales, according to Strategy Analytics, making them the fourth-place vendor in CDMA handsets behind LG, Motorola and Samsung. In the U.S., they enjoyed a combined third-quarter 2007 share of 8.3 percent, representing 3.7 million phones, the research company said.

Kyocera president Makoto Kawamura contended the "transaction will yield great synergies and economies of scale in areas such as technology portfolios, R&D, procurement, design, marketing and sales" Under the agreement, Kyocera gets access to Sanyo's research, development, design, materials procurement, manufacturing and sales and marketing of CDMA and PHS handsets, PHS base stations, and a range of related technologies, intellectual property and patents, Kyocera said.

Analyst Chris Ambrosio of Strategy Analytics said the acquisition "gives Kyocera important design resources and high-tier CDMA products that it failed to develop on its own."

In the United States, Kyocera's main focus has been on regional carriers, having lost Verizon Wireless's business a few years back, said analyst Bonny Joy, also with Strategy Analytics. In the United States, Sanyo offers six handsets through national carrier Sprint Nextel and MVNO Qwest. Kyocera offers 24 U.S.-market handsets, though not all are currently available through carriers. Kyocera's U.S. carrier accounts are smaller than Sprint and include Alltel, Virgin Mobile (which resells airtime on the Sprint network), Tracfone, Metro PCS, Cricket and U.S. Cellular.

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