Google leaving the Xperia S AOSP project to Sony

Some are claiming that the move has to do with proprietary binaries that were needed to make stock Android run on the Xperia S, and this is certainly possible. Sony mentions these binaries in the blog post about the change, and given Google's history to drop AOSP support for its own Galaxy Nexus because of proprietary keys needed on the CDMA model, it seems plausible that was a factor here. However, Sony and Google are painting the picture that the plan was never really for Google to be the primary force behind the Xperia S AOSP branch in the long run, and that eventually a move like this was expected. 

Google wants to focus its efforts on its own Nexus line, which has grown bigger this year, so, the Xperia S will still be supported in being a developer device, but now instead of Google doing the work in the AOSP main branch, Sony will be doing the work on GitHub. With the code available now for the Xperia S, AOSP will boot on the device and most things will work including the SD card and WiFi, although audio and modems don't work because of the need for those proprietary binaries. 

Sony is working on getting Android 4.2 up and running now as well. 

source: Sony Developer World & GitHub via Engadget