Sony Corp is in talks to buy Telefon AB LM Ericsson out of their50:50 joint venture, a source with direct knowledge of the matter toldReuters on Friday. Another source had told Reuters in July that talksabout a takeover were under way ahead of the end of the two firms'contract this month.
Sony and Ericsson have been talking for weeks about the futureof the venture because the companies' 10-year-old pact is up forrenewal this month, two industry sources told Reuters. The Wall StreetJournal said the talks were ongoing and could break apart at any time.Ericsson and Sony declined to comment on the reported talks. "We have along-term commitment to our joint ventures," said an Ericssonspokesman.
Many analysts say Japan's Sony needs to assert control overSony Ericsson if the venture is to recoup market share in thecut-throat world of smartphones. The joint venture, formed in 2001,thrived after its breakthrough with Walkman music phones and Cybershotcameraphones, both of which leveraged Sony's brands. But it lost out tobigger rivals Nokia and Samsung Electronics at the cheaper end of themarket, and was late to react to Apple's entrance into the high-end ofthe market.
Divorce good for both partners?
"A buyout would make a lot of sense for Ericsson as I believetheir share in the joint venture is worth to them between zero andminus 1 billion euros," said Bernstein analyst Pierre Ferragu."Whatever price they agree on, it would be a positive for Ericsson," hesaid. Shares in Sweden's Ericsson gained on the report and closed 6percent higher at 69.20 crowns on Thursday. A full takeover of theventure would boost Sony's overall offering, which includes content,gaming devices, consumer electronics and even tablet computers. But thecompany still lacks its own smartphones.
"The buyout allows Sony to move development in-house and betterintegrate other products like gaming into newer phones," said StevenNathasingh from US technology research firm Vaxa Inc. Last month at theIFA trade fair in Berlin, Sony Ericsson's phones were presented insidethe Sony hall, mixed with Sony's TV sets and new tablets.
Sony and Ericsson have been talking for weeks about the futureof the venture because the companies' 10-year-old pact is up forrenewal this month, two industry sources told Reuters. The Wall StreetJournal said the talks were ongoing and could break apart at any time.Ericsson and Sony declined to comment on the reported talks. "We have along-term commitment to our joint ventures," said an Ericssonspokesman.
Many analysts say Japan's Sony needs to assert control overSony Ericsson if the venture is to recoup market share in thecut-throat world of smartphones. The joint venture, formed in 2001,thrived after its breakthrough with Walkman music phones and Cybershotcameraphones, both of which leveraged Sony's brands. But it lost out tobigger rivals Nokia and Samsung Electronics at the cheaper end of themarket, and was late to react to Apple's entrance into the high-end ofthe market.
It has refocused its business to make smartphones using Google'sAndroid platform, but it has dropped to No. 9 in global cellphonerankings from No. 4 just a few years ago. It is making some progressand turned a net profit of 90 million euros last year after booking aloss of 836 million in 2009. But it reported another loss for theApril-June quarter. The venture is due to report its September quarterresults on October 14.
Divorce good for both partners?
"A buyout would make a lot of sense for Ericsson as I believetheir share in the joint venture is worth to them between zero andminus 1 billion euros," said Bernstein analyst Pierre Ferragu."Whatever price they agree on, it would be a positive for Ericsson," hesaid. Shares in Sweden's Ericsson gained on the report and closed 6percent higher at 69.20 crowns on Thursday. A full takeover of theventure would boost Sony's overall offering, which includes content,gaming devices, consumer electronics and even tablet computers. But thecompany still lacks its own smartphones.
"The buyout allows Sony to move development in-house and betterintegrate other products like gaming into newer phones," said StevenNathasingh from US technology research firm Vaxa Inc. Last month at theIFA trade fair in Berlin, Sony Ericsson's phones were presented insidethe Sony hall, mixed with Sony's TV sets and new tablets.
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