Ericsson to sell its stake in Sony Ericsson, Sony becoming the sole owner
October 27, 2011, 08:16 (CEST)
Sony Ericsson to become a wholly-owned subsidiary of Sony and integrated into Sony's broad platform of network-connected consumer electronics products
The transaction also provides Sony with a broad IP cross-licensing agreement and ownership of five essential patent families
Ericsson to receive EUR 1.05 billion cash payment
Sony and Ericsson to create wireless connectivity initiative to drive connectivity across multiple platforms
Ericsson (NASDAQ:ERIC) and Sony Corporation ("Sony") today announced that Sony will acquire Ericsson's 50 percent stake in Sony Ericsson Mobile Communications AB ("Sony Ericsson"), making the mobile handset business a wholly-owned subsidiary of Sony.
The transaction gives Sony an opportunity to rapidly integrate smartphones into its broad array of network-connected consumer electronics devices - including tablets, televisions and personal computers - for the benefit of consumers and the growth of its business. The transaction also provides Sony with a broad intellectual property (IP) cross-licensing agreement covering all products and services of Sony as well as ownership of five essential patent families relating to wireless handset technology.
As part of the transaction, Ericsson will receive a cash consideration of EUR 1.05 billion.
During the past ten 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.
This means that the synergies for Ericsson in having both a world leading technology and telecoms services portfolio and a handset operation are decreasing. Today Ericsson's focus is on the global wireless market as a whole; how wireless connectivity can benefit people, business and society beyond just phones. Consistent with that mission, by setting up a wireless connectivity initiative, Ericsson and Sony will work to drive and develop the market's adoption of connectivity across multiple platforms.
"This acquisition makes sense for Sony and Ericsson, and it will make the difference for consumers, who want to connect with content wherever they are, whenever they want. With a vibrant smartphone business and by gaining access to important strategic IP, notably a broad cross-license agreement, our four-screen strategy is in place. We can more rapidly and more widely offer consumers smartphones, laptops, tablets and televisions that seamlessly connect with one another and open up new worlds of online entertainment. This includes Sony's own acclaimed network services, like the PlayStation Network and Sony Entertainment Network," said Sir Howard Stringer, Sony's Chairman, Chief Executive Officer and President. Mr Stringer also noted that the acquisition will afford Sony operational efficiencies in engineering, network development and marketing, among other areas. "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."
"Ten years ago when we formed the joint venture, thereby combining Sony's consumer products knowledge with Ericsson's telecommunication technology expertise, it was a perfect match to drive the development of feature phones. Today we take an equally logical step as Sony acquires our stake in Sony Ericsson and makes it a part of its broad range of consumer devices. We will now enhance our focus on enabling connectivity for all devices, using our R&D and industry leading patent portfolio to realize a truly connected world" said Hans Vestberg, President and CEO of Ericsson.
When Sony Ericsson started its operations on October 1, 2001, it combined the unprofitable handset operations from Ericsson and Sony. Following a successful turnaround the company has become a market leader in the development of feature phones by integrating Sony's strong consumer products knowledge and Ericsson's telecommunications technology leadership. The WalkmanTM phone and Cyber-shotTM phone are well known examples.
With the successful introduction of the P1 in 2007, Sony Ericsson early on established itself in the smartphone segment. More recently, the company has successfully made the transition from feature phones to Android-based Xperia(TM) smartphones. By the end of the third quarter of 2011, Sony Ericsson held a market share of 11 percent (by value) in the Android phone market, representing 80 percent of the company's third quarter sales. During its ten years in operation Sony Ericsson has generated approximately EUR 1.5 billion of profit and paid dividends totalling approximately EUR 1.9 billion to its parent companies. Prominent models include "XperiaTM arc" and "XperiaTM mini" which received 2011 EISA Awards, while recent notable additions to the lineup include "XperiaTM PLAY" and "XperiaTM arc S".
The transaction, which has been approved by appropriate decision-making bodies of both companies, is expected to close in January 2012, subject to customary closing conditions, including regulatory approvals.
Ericsson has accounted for its 50 percent share in Sony Ericsson according to the equity method. Following completion of the transaction, Ericsson will have no outstanding guarantees relating to Sony Ericsson and will no longer account for Sony Ericsson as an investment on balance sheet. The transaction will result in a positive capital gain for Ericsson which will be defined after closing of the transaction.
SEB Enskilda is acting as Ericsson's sole financial advisor in the transaction.
1. hepresearch (unregistered)
Since Sony will be sole owner of the mobile unit, will more cutting-edge design and tech from Japan start making its way into new handsets in North America? And as for Ericsson, will they settle back into being a network equipment manufacturer only, or will they develop their own separate mobile device unit? If still in force, the cross-licensing agreements may be an indication... Ericsson leaving the JV may just mean that they didn't like where Sony was taking things, and Sony is big enough to throw enough money at Ericsson to get them off of their back. Will Sony take the mobile device unit to new places, or will it just die off when Ericsson leaves the JV? Opinions, anyone?
10. bobfreking55 (Posts: 866; Member since: 15 Jul 2011)
Samsung Electronics. LG electronics. Sony can stand alone. They're like the classiest of all the not too expensive gadgets.
Vaio. Bravia. Tablets.
and I think they would drop the xperia name to start anew.
5. hepresearch (unregistered)
Those were the best days for Sony Ericsson. Lately I feel that they are coming back from nearly diving into the abyss, but they are lucky they switched to Android before WP7 came out. We will see how that same choice plays out for Nokia... hopefully better than I am anticipating.
3. hepresearch (unregistered)
Hi "hepresearch", I think I'll take a stab at it... as Ericsson backs out of the device space completely, if Sony does bring new cutting-edge Japanese tech to their Xperia smartphone line in North America and elsewhere, and stays with the Android route, I foresee greater success and possibly bringing the mobile unit out of the red for once. Instead of just Samsung and HTC being the profitable competitors in the Android space, it would be nice to have Sony rise to the occasion and overcome their prior poor-reputation among certain folks. Hopefully Motorola will again join the profitability party as well. And with Ericsson patents cross-licensed, hopefully there won't be any significant holes in Sony's armour to patch shut when Apple comes bearing down on them...
So, ummm... talking to myself in third-person is really dumb, but it is sort of entertaining to think that maybe this is what it is like for gemini and taco when they reply, always supportively, back-and-forth on each other's comments... >8-P
13. snowgator (Posts: 3205; Member since: 19 Jan 2011)
Okay hepresearch, this time YOU rock!! Laughed a lot. And a very optimistic outlook. :-D
14. hepresearch (unregistered)
Well, you know... every once in a while the awesomeness just pops out at random... 8-)
4. tahnik (Posts: 133; Member since: 17 Jul 2011)
this will be really epic....i wont say they will beat everyone....but for sure something big is coming....
6. hepresearch (unregistered)
I like to think that you are right on the money.
8. XiphiasGladius (Posts: 801; Member since: 21 Aug 2011)
I hope they'll create a bang in Q1 2012
9. arcq12 (Posts: 733; Member since: 13 Oct 2011)
imagine, Ice Cream Sandwich powered Cybershot-Playstation Phone.. gosh Sony..
11. HTCiscool (Posts: 449; Member since: 16 Jul 2011)
Can someone please tell me how Ericsson pulled their weight in this partnership? From what I can tell they are just mooching off Sony.
12. akhi216 (Posts: 61; Member since: 01 May 2011)
Everyone knew this was coming. It was only a matter of time. Hopefully now Sony can put out and higher-end PSPhone because that Xperia Play was rather lacking. The problem with SE phones as of today is that higher-end from them are non-existent.Come on SE, were like two months from ICS and you have no dual-core devices whatsoever? I'm guessing that Sony sees this and wants to change it. I anticipate big things. What Xbox Live is to Windows phones can be what PlayStation Network is to Android phones if Sony is serious. As long as they don't have another XPlay fail they should be fine.
18. desertfox85 (Posts: 3; Member since: 27 Oct 2011)
Nozomi is coming... I just hope it arrives on time.
15. darac (Posts: 2156; Member since: 17 Oct 2011)
Well, Sony was waiting to put it's name on the upcoming "Nozomi" flagship.
Also, they planned to release it with ICS, and now that will take some time to be done perfectly, with their next gen custom UI.
Anyway, the prospects for that phone(as well as the whole future Sony xperia phone line) are extremely promising now, with the instant brand recognition badge on it.
That factor was seriously lacking in the US -
with most people being like Sony What? at the mention of Sony Ericsson.
16. rockstarlive (Posts: 307; Member since: 19 Oct 2011)
I think they are still going to keep the Xperia line, its been there since the X1.
Google is probably gonna team up with them, thats my prediction.
19. corporateJP (Posts: 1555; Member since: 28 Nov 2009)
"Here...here's a couple of billion dollars to take your name off the phone so we can just have ours on it."
That about sums it up.