Sony isn’t so idle to sit on the sixth place in battlefield of cellphones. Today, Sony has announced that company will acquire Ericsson’s 50% stake in Sony Ericsson Mobile Communication, making the mobile handset business entirely possessed subsidiary of Sony. This new initiative will allow Sony to expand its broad platform of network –connected consumer electronics products including tablets, televisions and personal computers – for the consumers benefit and its business growth.
The transaction between Sony and Ericsson also provides Sony a broad intellectual property (IP) cross-licensing agreement, which cover all products and services of Sony and ownership of five essential patent families related to wireless handset technology. Ericsson will receive a cash consideration of $2.10 billion, as part of transaction.
Sony Ericsson Mobile Communication AB is (a past existence in future) a joint venture, established on October 1, 2001 by Japanese electronics company Sony Corporation and the Swedish telecommunication company Ericsson to manufacture mobile phones. Consequently, both the companies stopped manufacturing their own mobile phones independently and jointly rose as world 4th largest mobile manufacture after Nokia, Samsung and LG by 2009. However, the company’s market share started going down hills, to 6th position in 2010, due to invasion of RIM and Apple in the market.
If we focus on the background of Ericsson before joint venture with Sony; the company had been in the cellular market for decade and was world no 3rd cellular handset maker but was struggling with huge losses in March 2000. This was mainly due to its inability to produce cheaper phones like Nokia. Once Ericsson’s president said, “Mobile phones are really a core business for Ericsson, we don’t be as successful, if don’t have phones”.
On other hand, Sony was a marginal player in the worldwide cell phone market with share of less than 1 % in 2000.
By August 2011, both the companies had finalized to work as joint venture, and started with an initial combine workforce of 3,500 employees. As initial hick-ups, Sony Ericsson struggled for long time, and reached at fifth-place in handset market by 2005. On March 1, 2005, Sony Ericsson introduced revolutionary K750i and W800i (the first Walkman phone capable of 30 Hrs of music player), which became very popular, thereafter, the market share increased and became 4th largest mobile manufacturer in 2009.
Sony Ericsson has struggled since the arrival of Apple’s iPhone in Q3 of 2007 as its handset consignment have fallen from 30.8 million in Q4 2007 to only 8.1 million in Q1 2011. The obscurity of the Symbian operating system, initially triggered by Apple’s iPhone and then by Google’s Android, has affected Sony Ericsson’s position in the market.
But that was not all for Sony Ericsson from competition point of view. Company was also dominated by its South Korean rival LG Electronics in Q1 2008. Sony Ericsson’s profits fell by 43 % to approx US $179.6697 million, sales plunged by 8% and market share went down from 9.4% to 7.9%. By the end of 2010, it was quite clear that Sony needs to search for a new alternate strategy, to enhance its market share which finally resulted as the acquisition of Ericsson.
In context of this acquisition, Sony’s Chairman, chief Executive Officer and President- Sir Howard Stringer – said, “This acquisition makes sense for Sony and Ericsson, and it will make the difference for consumers, who want to connect with content wherever they are, whenever they want. 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”.
After this acquisition, Sony can, more rapidly and widely, offer consumers Smartphone, laptops, tablets and televisions that seamlessly connect with one another and open up new worlds of online entertainment. Instead, it will strengthen Sony’s own acclaimed network services, like the PlayStation Network and Sony Entertainment Network.
Both the companies today take an equally logical step, as Sony acquires stake in Sony Ericsson and makes it a part of its broad range of consumer devices. Whereas, Ericsson will focus on to enhance enabling connectivity for all devices, by using their R&D and industry leading patent portfolios.
By all this new development, we can only expect to see many more revolutionary smartphones from Sony that will have true capabilities to challenge its competitors and, at the end, users will be benefited.