Sony Ericsson Deal 'Another Nail in the Coffin' of European Phone Industry

By Erin Harrison October 19, 2011

While we’ve heard that Sony Corp. is close to reaching a deal to buy its Swedish telecom partner Telefon AB LM Ericsson’s stake in their smartphone joint venture, analysts say the move is good for the Japanese giant, yet it’s another nail in the coffin of the European mobile phone industry.

“In a push to enhance its smartphone business, Japanese electronics giant Sony is nearing a deal to buy out Swedish telecom firm Ericsson’s stake in their mobile phone joint venture,” The Wall Street Journal reported.

Once Sony gains full control over its 50-50 partnership, the Japanese company plans to integrate its smartphone operation with its tablet, hand-held game console and personal computer businesses to save on costs and better synchronize development of mobile devices, the Journal said, citing “people familiar with the matter.”

“Sony had not been able to carve out its presence globally (in smartphones) with Ericsson,” said Okasan Securities strategist Hideyuki Ishiguro. “Even if it gets full control of the venture, the competitive landscape of the smartphone industry already seems mapped out,” he told Dow Jones Newswires.

Sony is pushing for a deal as competitors such as Apple and South Korean Samsung Electronics forge ahead with closely coupled strategies for smartphones and tablet computers, according to the WSJ.

It remains unclear how much Sony would pay Ericsson “because of the complexity of a possible transaction that could involve Ericsson’s mobile-technology patent portfolio,” the Journal said.

In related news, Sony Ericsson saw lower third-quarter profits in light of lower margins and higher taxes, TechZone360 reported. In addition, the company announced it will limit its portfolio to smartphones in 2012, according to the Associated Press.

The joint venture’s quarterly net profit dropped to 0 from $67.26 million during the same time period in 2010. Also, quarterly sales dropped to $2.18 billion from $2.2 billion in the same quarter in 2010, the AP said.

“We will continue to invest in the smartphone market, shifting the entire portfolio to smartphones during 2012,” Sony Ericsson CEO Bert Nordberg announced.


Erin Harrison is Executive Editor, Strategic Initiatives, for TMC, where she oversees the company's strategic editorial initiatives, including the launch of several new print and online initiatives. She plays an active role in the print publications and TechZone360, covering IP communications, information technology and other related topics. To read more of Erin's articles, please visit her columnist page.

Edited by Rich Steeves

Executive Editor, Strategic Initiatives

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