In line with previous rumors and speculation, Sony has finally dropped the ax on the Sony Ericsson joint venture and buy Ericsson’s stake outright for $1.5 billion in cash. The deal will make the mobile phone manufacturer a “wholly-owned subsidiary of Sony and integrated into Sony’s broad platform of network-connected consumer electronics products.” Ericsson’s massive mobile patent library that Sony Ericsson used to its advantage is not being sold with the other assets but instead will be part of a cross-licensing deal that was stipulated in the buyout terms. This doesn’t make Sony immune to patent lawsuits that are bound to come its way from other mobile giants such as Apple, but it does make them less of a target since Ericsson holds patents to an enormous amount of technologies used in mobile phones today, ranging from base stations down to internal phone antennas.
For years Sony Ericsson has been bleeding cash and the joint venture has seemed to lack focus and direction since the iPhone came out in 2007. In a series of bad moves such as initially choosing Windows Mobile for its Xperia line, then flipping over to Symbian in less than one product cycle, and then scrambling to catch up with the Android buzz, Sony was rumored to be increasingly disgruntled with how Ericsson was handling the venture and wanted out. The rumors were seeping out for years, but after a third straight year of seeing nothing but red in Sony Ericsson’s books, Sony decided to pull the trigger.
When Sony Ericsson announced their partnership in 2001, I was one of the first people on board. At the time I had bought my second Ericsson, the A2628s, and I figured that the partnership could only mean great things for the handsets. For a while I was right: from 2o01 until 2008 I was a die hard Sony Ericsson fanboy and I was not alone. Sony Ericsson exploded in the industry with unit sales numbers climbing every year until they peaked at 103.4 million in 2007. Their products combined beautiful Swedish design with ambitious Japanese technology to create some of the most memorable phones the industry has seen (the T68i, the T610, the Z500, the W800, the K800, and the C905) but the arrival of Apple’s iPhone threw them off balance as they struggled to understand why their innovative now-featurephones were not catering to the masses. This also led to lackluster hardware quality and buggy software that sent Sony Ericsson’s sales downward so fast and so hard that it made RIM’s BlackBerry brand look like a champion. By 2010, Sony Ericsson’s unit sales had dropped down to 43.1 million, just 1.1 million more than it had in its 2001 debut year.
The news of Sony buying out Ericsson’s stake should not be looked upon as a failure, however. The joint venture may have failed but the knowledge and experience Sony gained over the last ten years will give the handsets a “rebirth” under the Sony brand. Sony will now be able to fully integrate the handset division into its robust portfolio of software, technologies, and brands. Keep in mind that Sony was making its own cell phones between 1997 and 2001 and its hardware manufacturing history will allow Sony to seamlessly crank out smartphones efficiently. Sony has also demonstrated that it wants its PlayStation brand to spread across multiple product lines and tear down barriers between those products when it comes to the living room experience. With its upcoming Tablet P and Tablet S models on the horizon, adding a handset worthy of the PlayStation experience seems to like the next logical step.
The buyout deal has been approved by both the Sony and the Ericsson boards, but requires regulatory approval to become finalized. Approval is anticipated to happen in January 2012 unless regulators see a reason to keep the failed marriage going.
Source: LA Times
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