Sony buying out Ericsson's stake for €1.05B

Ericsson gets cash, Sony gets IP deal with patents

After 10 years together, Sony and Ericsson are breaking up.  Sort of.  The two companies announced Thursday morning that Sony is acquiring Ericsson’s 50% stake in their joint venture, Sony Ericsson.  Ericsson will walk away with €1.05 billion in cash, and the handset business will become a wholly owned subsidiary of Sony.

Why the breakup after 10 years?  As it happens, the handset market just ain’t what it used to be.  Consumers are rapidly shifting over to smartphones and Ericsson has little reason to keep one foot in telecom services and one foot in handset manufacturing.  Thus, Ericsson will be taking its patent portfolio and focusing entirely on the global wireless market.

Sony, meanwhile, will benefit from a broad intellectual property cross-licensing agreement that covers all products and services of Sony, as well as ownership of five essential patent families related to wireless handset technology.

“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,” said Sony Chairman, CEO, and President Howard Stringer, in a statement.  “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.”

Stringer added that the acquisition will allow Sony to streamline the areas of engineering, network development, and marketing.

As of the third quarter of 2011, Sony Ericsson accounted for 11% of the Android market, and Android smartphones comprised some 80% of Sony Ericsson’s sales.  The company generated €6.3 billion in sales in 2010 and netted an income of €90 million.

Headquartered in London, Sony Ericsson currently employs some 7,500 people.  The company could not be reached for comment as to whether there will be any layoffs as part of the split.