SonyEricsson Sony and Ericsson part ways, remain friends

In a not entirely unexpected move, Sony is set to buy out Ericsson from the joint Sony Ericsson Mobile Communications AB joint venture for a not insignificant €1.05 billion and will turn Sony Ericsson into a wholly-owned subsidiary that will fall under its network-connected consumer electronics division. The two companies remain friendly though, the deal also includes an IP cross-licensing agreement and they'll also create a joint wireless connectivity initiative.

In a not entirely unexpected move, Sony is set to buy out Ericsson from the joint Sony Ericsson Mobile Communications AB joint venture for a not insignificant €1.05 billion and will turn Sony Ericsson into a wholly-owned subsidiary that will fall under its network-connected consumer electronics division. The two companies remain friendly though, the deal also includes an IP cross-licensing agreement and they'll also create a joint wireless connectivity initiative.

It's been 10 years since Sony and Ericsson decided to team up and create Sony Ericsson and between then and now, the mobile device market has changed and is still changing at a rapid pace. Sony Ericsson has sadly gone from third position to a 10th position when it comes to mobile handset market share or from 8.5 percent to 1.7 percent of the global market share. Back in 2008 Sony Ericsson said that their goal was to become the third biggest mobile handset maker within the next five year, but instead the company dropped from fifth to 10th position since then.

Last year the company went out and said that they wanted to be number one in Android handsets and although as with Motorola, it seems like Android has been a saviour to a degree for Sony Ericsson, it's clear that the company is far from the market leader. It's easy to point fingers as to what went wrong, but some of it has been Sony's unwillingness to use some of its brand names, most significantly the Playstation brand for Sony Ericsson products, at least until it's generally been too little too late. The Playstation phone didn't exactly take the world with a storm, but in all fairness some of Sony Ericsson's other Xperia handsets aren't half bad.

The new Sony mobile handset division which has yet to get an official name – although all future handsets will only carry the Sony brand – has a tough job ahead of it. Currently a lot of its R&D is located in Sweden, although it's expected that this division will be closed down over time with most, if not all of it being moved to Japan. With tough competition from both the big Korean handset manufacturers, especially Samsung, as well as HTC and let's not forget Apple, it's clear that Sony is going to have to come up with some pretty impressive hardware and get it out in the market in a timely fashion. With what happened in Japan earlier this year, most of Sony Ericsson's handsets were delayed, some by as much as six months and in an industry that's moving in leaps and bounds on almost a monthly basis when it comes to new handsets, this is the kind of thing that just isn't allowed to happen.

As for Ericsson, well, they'll go on their merry way and continue to build the network infrastructure which is its core competence these days and the company is also busy doing various projects involving digital content delivery which ties in nicely with its network infrastructure business. As for ST Ericsson, Ericsson's joint venture to develop various device end solutions with STMicroelectronics for handsets and wireless modems, well, it's likely to take a potential hit from the split from Sony, although it should be said that none of Sony Ericsson's handsets used the ST Ericsson ARM processors, at least not to our knowledge. That said, we'd expect this business venture to continue to develop modem technology for handsets, especially as we slowly continue to move towards more LTE enabled devices where ST Ericsson has some potentially strong solutions.

The press release doesn't go into any details about the IP cross-licensing deal, except to mention that it involves five essential patent families. This should involve baseband technology for 2G, 3G and 4G networks, as well as other handset related technology that Ericsson holds patents for. With regards to the wireless connectivity initiative the press release simply reads "Ericsson and Sony will work to drive and develop the market's adoption of connectivity across multiple platforms" which really doesn't explain what the two companies will be doing together. The deal is expected to close in January 2012 pending the usual regulatory and shareholder approval.

Source: Ericsson