Sony To Buy Sony Ericsson

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London - Sony cited the rise of smartphones as content-delivery devices as the key reason for buying out its 50 percent stake in Sony Ericsson from telecom-equipment maker Ericsson.

Analysts see the potential for Sony to put more marketing muscle behind Sony Ericsson products, whose declining sales led to a corporate downsizing in 2008 and 2009. In its fiscal third quarter ending September, Sony Ericsson posted "slightly above break-even" net profits on a 1 percent decline in sales. That followed a second quarter in which the company slipped back into the red following five consecutive quarters of net profits.

 Sony will pay Ericsson 1.05 billion euros ($1.48 billion) in cash for Sony Ericsson, turning it into a wholly owned subsidiary.  The transaction is expected to close in January, subject to regulatory approvals. Sony and Ericsson formed the 50-50 joint venture 10 years ago in October 2001.

The transaction includes what the company called "a broad intellectual property (IP) cross-licensing agreement" and ownership of "five essential patent families relating to wireless handset technology."

 The two companies also agreed to set up a wireless connectivity initiative to drive the development of connectivity across multiple platforms.

 By owning the cellphone maker outright, Sony "can more rapidly and more widely offer consumers smartphones, laptops, tablets and televisions that seamlessly connect with one another," said Howard Stringer, Sony chairman, CEO and president. In addition, "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," he said in pointing to Sony's PlayStation Network and Sony's audio and video streaming services, which are accessible through Sony home CE devices.

 Consumers "want to connect with content wherever they are, whenever they want," Stinger added in noting that cellphones have evolved from simple communications devices into content-delivery devices.

The acquisition will also deliver operational efficiencies in engineering, network development, marketing and other areas, Stringer said.

The company attributed Ericsson's decision to sell to what it described as declining synergies in having a telecom-equipment and -services provider also sell handsets.

Industry analyst Jeff Kagan hailed the acquisition, contending that the partnership "stopped making sense years ago" as the two owners pulled the company "in different directions." The result, he said, "was stale and boring handsets, and very weak marketing, public relations and advertising. The result of that was poor sales."

Whether Sony will be successful on its own remains to be seen, he said, but "having this company now owned by one single company makes so much more sense and gives them the best chances for success going forward."

Said Neil Mawston, director of the global wireless practice at Strategy Analytics, "Having just one master will help Sony Ericsson to make faster decisions, while Sony gets access to a leading mobile device manufacturer with a global distribution network."

"If Sony and Sony Ericsson can successfully combine their branding, multi-platform product development and services expertise, then Sony could potentially be the next Apple," he continued. Nonetheless, "Sony and Sony Ericsson have both struggled in recent years, and it remains to be seen whether they can deliver on their promise."

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