Friday, October 7, 2011

Sony Seeks Full Control over Sony Ericsson

Sony reportedly is pursuing a deal to acquire total ownership and control of its mobile Relevant Products/Services-device joint venture with Ericsson.

Citing people familiar with the matter, The Wall Street Journal said Thursday that Sony intended to acquire full ownership of Sony Ericsson "to save on costs and better synchronize development of mobile devices."

An Ericsson buyout could potentially help Sony to achieve superior integration Relevant Products/Services of wireless Relevant Products/Services technology for which Ericsson holds key patents with Sony's other mobile products -- such as portable gaming machines, media tablets, e-readers and notebooks. Industry analysts value the deal in the $1.3 billion to $1.7 billion range, the Journal said.

Right now Sony has more to offer to the joint venture than Ericsson because of the way the mobile market has developed, said Gartner Relevant Products/Services analyst Carolina Milanesi.

"Radios and networks are more of a commodity to some extent than content and an end-to-end portfolio of products," Milanesi said. "With how the market is developing, it would be harder and harder not to control that end-to-end offering."

Innovating Quickly

By acquiring Ericsson's interest in their mobile-phone joint venture, Sony also would be able to more quickly launch other types of innovative products featuring wireless capabilities.

"Look at the fact that Sony launched the tablets and not Sony Ericsson, [and] remember also how long it took for Sony Ericsson to be able to use the Play brand," Milanesi said in an email Thursday.

What's more, gaining 100 percent control over the joint venture would give Sony the ability to offer wireless products at lower prices.

"I think that having one company in charge would make the company more effective," Milanesi said. "But this does not necessarily solve the issues that Sony Ericsson is facing in markets such as Western Europe."

Sony Ericsson's share of the global handset market was a mere 1.7 percent at the end of this year's second quarter, according to Gartner. The joint venture's handset shipments fell 31 percent year over year to 7.6 million units in the three months through June.

Still, Sony Ericsson attributed the shortfall in major part to the earthquake that decimated northern Japan in March of this year.

"We estimate that the impact of earthquake-related supply chain constraints on our portfolio was close to 1.5 million units," Sony Ericsson CEO Bert Nordberg told investors in July.

Riding the Android Relevant Products/Services Wave

Sony Ericsson has enjoyed some success in Europe and elsewhere abroad this year through the release of new Android-based handset models. Nordberg said smartphone shipments accounted for more than 70 percent of the joint venture's total sales during the second quarter of 2011 and that Sony had shipped a cumulative total of 16 million Xperia smartphones through the end of June.

"Android-powered handsets from the likes of Samsung, HTC, and Sony Ericsson have been able to drive strong volumes and to grab the biggest slice of share from the declining Symbian as Nokia moves to Windows Relevant Products/Services Phones," said IDC Relevant Products/Services analyst Francisco Jeronimo.

However, Google's acquisition of Motorola Mobility has raised questions at Sony Ericsson and other vendors about the possible drawbacks of their continuing dependence on the Android platform.

"Samsung, HTC, and Sony Ericsson may now look at other platforms as a way to diversify the risk of being so dependent on one platform," Jeronimo said.
 

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