Post date: Oct 07, 2011 3:0:51 PM
Sony Corp. is in talks to buy out Ericsson's stake in their joint mobile phone venture, as Sony looks to catch up with its rivals, according to a source.
EUROPE-SONY ERICSSON - Japan's Sony Corp is in talks to buy out Ericsson's stake in their mobile phone joint venture according to a source with direct knowledge of the matter.
Hampered by a disjointed strategy toward devices and online services, such a deal could help Sony to compete better with rivals like Apple and Samsung.
Analysts speculate the deal could be worth as much as $1.3 billion.
Both Sony and Ericsson declined to comment on the talks, though sources tell Reuters the Japanese and Swedish partners have been talking for several weeks about the future of the joint venture.
They both currently hold a 50% stake and have to decide this month whether to renew their 10-year-old partnership.
The joint venture initially did well, but it later lost out to bigger rivals at both the higher and lower ends of the market.
Sony Ericsson was late to react to a challenge from Apple's iPhone -- something its CEO Bert Nordberg admitted to earlier this week.
Recently, the company has refocused its business on smartphones running Google's market leading Android software.
The shift appeared to be paying off last year, with the joint company reporting profit of 90 million euros, but it made a loss in the quarter from April to June this year.
Sony shareholders don't seem that keen on the potential cost of going it alone. Its shares closed down over three and a half percent, but Ericsson stock turned around in the early afternoon to rise by a percent.
Joanna Partridge, Reuters
It has refocused its business to make smartphones using Google's <GOOG.O> Android platform, but has dropped to No. 9 in global cellphone rankings from No. 4 just a few years ago.
The joint venture is making some progress and turned in a net profit of 90 million euros last year after booking a loss of 836 million euros in 2009. But it reported another loss for the April-June quarter.
The venture is due to report its September quarter results on Oct 14.
"A buyout would make a lot of sense for Ericsson as I believe their share in the joint venture is worth to them between zero and minus 1 billion euros," said Sanford Bernstein analyst Pierre Ferragu.
"Whatever price they agree on, it would be a positive for Ericsson."
Shares in Sweden's Ericsson gained on the report and closed 6 percent higher at 69.20 crowns on Thursday.
Last month at the IFA trade fair in Berlin, Sony Ericsson's phones were presented inside the Sony hall, mixed with Sony's TV sets and new tablets.