Sony May Buy Ericsson’s Stake In Mobile Venture

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Sony is reportedly in talks to buy Ericsson out of their flagging mobile phone joint venture

Sony is reportedly in talks to buy out Ericsson’s stake in their mobile phone joint venture, in a bid to catch up with rivals in the smartphone market.

Industry sources told the Wall Street Journal that the two companies have held regular discussions over the past few weeks about the future of the 50:50 joint venture, because they must decide this month whether or not to renew their 10-year-old contract. Analysts have estimated that Ericsson’s stake in the venture could be valued at up to €1.25 billion (£1.08m).

If Ericsson decided to back out of the venture it would allow Sony to build on Sony Ericsson’s existing Google’s Android smartphones, while freeing Ericsson to concentrate on sales of wireless transmission equipment and services.

Sony and Ericsson both declined to comment on the reported talks. However, Reuters quoted an Ericsson spokesperson as saying: “We have a long-term commitment to our joint ventures.”

Struggling to break into smartphones

Ericsson and Sony teamed up in October 2001, with the aim of overtaking Nokia as the world’s biggest mobile-phone maker within five years. Ten years later, Nokia is still the biggest handset maker by units, according to Strategy Analytics, and Apple and Samsung dominate the smartphone market.

Sony Ericsson reported its first quarterly loss in more than a year on 15 July 2011. Chief Executive Officer Bert Nordberg said at the time the company was ramping down its feature phone business as the worldwide market for handsets without smartphone software was “collapsing.”

The company has made efforts to break into the crowded smartphone market with its Xperia range of devices, running Android. However sales have suffered as a result of supply-chain disruptions following the Japanese earthquake and tsunami in March this year. Sony predicted at the time that losses from the disaster would amount to $269 million (£166m).

Sony Ericsson currently accounts for around 1.7 percent of all global mobile phone sales, compared to a 3 percent share last year, according to a recent report by technology research firm Gartner. It has also fallen from its position as the fourth-largest mobile phone player just a few years ago, to number nine.

“Sony had not been able to carve out its presence globally (in smartphones) with Ericsson,” said Okasan Securities strategist Hideyuki Ishiguro. “Even if it gets full control of the venture, the competitive landscape of the smartphone industry already seems mapped out,” he told Dow Jones Newswires.

Other analysts have suggested the split could help accelerate Sony’s efforts to push its vast library of content through its game consoles, smartphones and tablet computers, amid competition from Apple’s iTunes and App store.

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