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Sony to buy Ericsson's part of mobile venture Sony Ericsson

Sony Corp. will pay Ericsson about $1.5 billion for its half of Sony Ericsson Mobile Communications, which makes a variety of mobile devices.

October 28, 2011|By David Sarno and Andrea Chang, Los Angeles Times
  • Sony Ericsson's Xperia Play smartphone, aimed at consumers who like to play games, came out this spring.
Sony Ericsson's Xperia Play smartphone, aimed at consumers who like… (Andrew H. Walker, Getty…)

In the latest sign that smartphones are replacing simpler cellphones, Swedish device maker Ericsson is getting out of the business it helped to foster a decade ago.

Japanese electronics giant Sony Corp. will pay Ericsson about $1.5 billion for its half of the Sony Ericsson Mobile Communications joint venture, which makes a variety of mobile devices including some Google-powered Android smartphones.

Ericsson, a pioneering company that helped popularize simpler cellphones in the 1990s, will step out of the mobile market to concentrate on other elements of its networking business. If the deal is cleared by regulators, 10-year-old Sony Ericsson will become a wholly owned subsidiary of Sony.

Adding smartphones to its main catalog would enable Sony to produce televisions and mobile devices that better communicate with one another, the company said, perhaps helping it become a stronger competitor against firms such as Apple Inc., which makes the iPhone, iPad and Mac computer.

"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," Howard Stringer, Sony's chairman, chief executive and president, said in a statement.

Sony Ericsson was launched Oct. 1, 2001, but had trouble gaining traction in the fast-moving cellphone business, trailing companies like Nokia and BlackBerry maker Research in Motion Inc., and later smartphone makers like Apple, Samsung Corp. and HTC Corp.

The firm controlled only about 4.2% of the global smartphone market during this year's second quarter, according to Canalys, a Palo Alto, Calif., market research firm. Its footing in the broader cellphone market, which includes simpler "feature phones," was even smaller at 2.1%.

"They haven't shown a whole lot of competency," said analyst Andy Hargreaves of Pacific Crest Securities. "Ever since smartphones took over, Sony Ericsson has lost market share. They've got money and interesting assets but haven't been able to put those together."

A key part of the deal will be Sony's access to large groups of patents, which legally protect certain of its inventions and technical innovations. Patents are becoming increasingly important as competing smartphone and tablet makers such as Apple and Samsung Corp. ramp up legal battles to assert control over many elements of smartphone function and design.

Earlier this year, Sony teamed with Apple, Microsoft Corp. and three others to buy more than 6,000 patents from the bankrupt Canadian tech company Nortel for $4.5 billion.

Google, meanwhile, has been working on beefing up its patent holdings. In August, the company announced a deal to purchase Motorola Mobility Holdings Inc. for $12.5 billion as part of that effort.

Analysts were unclear about whether the Sony Ericsson deal would bolster Sony's prospects in the global smartphone business.

"It's a hugely competitive smartphone market, so we'll see," said Chris Jones of Canalys. Sony "needs to differentiate its product. It needs to bring some of the old Sony magic" and create "a conveyor belt of new devices."

The boards of both companies have approved the buyout deal, which is subject to regulatory approval. Sony and Ericsson expect the deal to close in January.

david.sarno@latimes.com

andrea.chang@latimes.com

Times staff writer Nathan Olivarez-Giles contributed to this report.

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