Sony to buy Sony Ericsson, turn into subsidiary

The Japanese consumer electronics maker will pay Ericsson $1.5 billion for its share of the mobile phone joint venture and related patents

Sony said Thursday it will acquire Ericsson's 50 percent share in their Sony Ericsson mobile phone joint venture, turning the company into a subsidiary in January 2012.

The Tokyo-based electronics maker said in a press release it will pay Ericsson €1.05 billion ($1.5 billion) in the deal, which includes several sets of related patents and a cross-licensing agreement for intellectual property.

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Sony has until now launched its smartphones through the joint venture, which began operations in 2001. The deal will allow it to integrate phones into its overall product lineup, as rivals such as Apple and Samsung do now, and better leverage its broad music and movie holdings.

"During the past 10 years the mobile market has shifted focus from simple mobile phones to rich smartphones that include access to internet services and content. The transaction is a logical strategic step that takes into account the nature of this evolution and its impact on the marketplace," Sony said in its release.

The tie-up helped turn around the ailing phone businesses of both companies, by leveraging well-known Sony brands into phone models such as the Walkman and Cybershot series.

The joint company has recently released its advanced phones under the Xperia brand, and Sony has expanded its streaming networks and game download services to work on the Android-driven devices.

Sony said the deal will allow it to include phones into its "four-screen strategy," which aims to offer content and interconnect smartphones, laptops, tablets, and televisions.

“This is the last piece of the puzzle,” said Sony CEO Howard Stringer during a press conference in London. He was joined by Ericsson’s CEO Hans Vestberg, who said that handing over its share of Sony Ericsson to Sony is a natural step, leaving the company to focus on building and running mobile networks.

There is no question that the smartphone has become very important for any consumer electronics company.

“There are now more smartphones in the U.S. than there are people & people have fallen in love with their smartphones,” said Stringer.

The possibilities are leaving Stringer feeling optimistic about catching up with the likes Samsung, Apple and HTC, which today dominate the smartphone business, he said.

The deal was widely expected, following a new round of rumors a few weeks ago.

Consumer electronics vendors are looking for ways to set themselves apart from the competition, and offering an integrated user experience across tablets, smartphones and the living room TV is one of the ways they hope to do that, IDC analyst Francisco Jeronimo said at the time.

"If you are a consumer electronics giant like Sony, you need to be doing this and you need to have been doing it for a while," said Ben Wood, director of research at CCS Insight, who thinks the deal should have happened a few years ago.

A new Sony task force will examine how best to integrate Sony Ericsson and its smartphones with the rest of the company, and also look into how it will be branded, according to Stringer.

In the short term, the Sony Ericsson brand will live on. But Sony will work on coming up with a new one, he said.

Ericsson and Sony are not cutting their ties entirely , and will meet on a regular basis to discuss the wireless industry, the future of which Vestberg summed up by saying: “anything that benefits from being connected will be connected.”

Copyright © 2011 IDG Communications, Inc.

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