Whatever course of action is decided on, it’s clear that something has to give at Sony Ericsson. In addition to that 2Q loss, the firm has slipped down the global handset sales charts as rivals including Apple, ZTE and HTC have ramped sales. The joint venture ranked in tenth place during the quarter, Gartner figures show, a far cry from the top three position held when the venture was formed.
Reports that Sony is considering buying Ericsson out of the pair’s handset joint venture make sense.
The world has changed a lot in the decade since Sony Ericsson was formed, with the shift in focus from hardware to content ‘ecosystems’ making Ericsson’s contribution to the business far less valuable than Sony’s huge stack of music, film and gaming titles.
Sony is likely considering all options that will allow it to better leverage that content against Apple, Google and even Amazon. Taking control of the handset business would arguably allow it to develop a more coherent content strategy incorporating its TV sets, PlayStation games consoles, and mobile phones.
Ericsson’s 50% stake in the joint venture is valued at €1 billion to €1.25 billion, Bloomberg reports, which is a lot considering the venture generated a net loss of €50 million in the second quarter following a collapse of low- and mid-tier device sales.
With that in mind, selling its stake would make sense for Ericsson, which is currently riding high in global infrastructure sales.
Handset patents could be a stumbling block to any Sony buyout, however analysts told Bloomberg the firm holds around 4,000 patents of its own, and will also be able to utilize Nortel patents acquired as part of a consortium in July.
In addition, Ericsson isn’t likely to hold its current partner to ransom over its patents should a buyout happen. If nothing else, licensing to Sony would add to its current patent income.