Rumour Mill: Sony Ericsson need marriage guidance not divorce

A report in a German magazine has provoked a wildfire of speculation over the likely breakup of the Sony Ericsson handset partnership. The original article talked of Ericsson wanting to dissolve the agreement, and Sony opening negotiations with banks to raise the necessary financing to acquire the 50 per cent stake owned by Ericsson.

Sony Ericsson has been buffeted almost since birth in 2001 by the differing strategies adopted by its owners--so this latest disagreement would appear to be one of many over the past years. Only last summer, Sony's CEO, Howard Stringer, told the German newspaper, Die Welt, that the two companies needed to reform their cooperation otherwise the joint venture would fail. Asked if the companies could break up the joint venture, he commented "it's certainly been a difficult year but buying out a partner is never an easy thing."

There is also a question over whether Sony could raise the funds given that it announced its first loss in 14 years, and the perilous state of the worldwide financial markets and their current attitude towards risk. Interestingly, Denmark's Danske Bank believes Ericsson would net very little cash from the deal, with some commentators believing the deal could end up costing Ericsson if the timing is mishandled.

Other industry observers point to the more recent spat between the two parents over Sony Ericsson's desire to build a PlayStation phone. This request was denied by Sony, while the recent restructuring by the Japanese company put former PlayStation boss Kaz Hirai in charge of new mobile products, another indicator, according to conspiracy theorists, of a PSP phone being on Sony's future roadmap.

Albeit that Sony has increasingly taken control of its handsets' design directions, such as with the Xperia X1, is the company capable of making a success on its own in a global cell phone market that is not only ferociously competitive, but presently in decline?

This partnership would seem to be in decline, but a breakup in today's climate would be a very high-risk venture for Sony.

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