Kyocera To Buy Sanyo’s Cellular Business - Twice

Kyocera To Buy Sanyo’s Cellular Business

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Kyoto, Japan — 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.

Kyocera’s other businesses include ceramics and components for electronics products, solar-power products, and the Kyocera-Mita copier and printer products for business. Kyocera’s history in consumer products includes the KLH brand of high-end audio components in the 1980s and the Yashica and Contax camera brands, which it no longer markets.

The Sanyo 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.

“Furthermore, the Kyocera and Sanyo product portfolios are highly complementary and will allow us to offer a broader lineup of handsets and data devices to all of our carrier customers,” said Kawamura.

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 U.S., 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. “We think this acquisition will give the resources for building top-tier accounts,” she said, noting that Sanyo is sold mainly be national carrier Sprint and that Sanyo phones “have been consistently featured among the top sellers” at Sprint.

  “Kyocera design elements are best suited for entry-tier and mid-tier devices,” she added, “while Sanyo has proven that it can compete on style and functionality with its Katana and M1 and Katana series. In this aspect, we think Kyocera will be able to change itself to a broader player in the US CDMA market.

Motorola, Samsung and LG are the three main CDMA handset vendors, each accounting roughly 20-25 percent share, leaving 25-40 percent share for others, she continued. “This acquisition will enable Kyocera to consolidate the ‘others’ segment.”

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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