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Sony prepares to take control of the struggling unit, which has fallen from 4th to 9th in last three years

One of the quieter Android phonemakers has been Sony Corp.'s (TYO:6758) and Ericsson Telefonab's (OMX:ERIC-B) joint-venture Sony Ericsson.  Sony Ericsson -- currently the world's ninth largest global phone maker -- has kept a relatively low profile as it has been one of the few larger Android phonemakers to not be harassed by Microsoft Corp. (MSFT) over licensing or by Apple, Inc. (AAPL) in its anti-Android crusade.

I. Sony May Not be Prepared for the Mess It's Diving Into

But with Sony preparing to take Ericsson's stake in the joint venture off its hands, the situation is looking increasingly dire for the London-based phonemaker. Sony Ericsson reports losing €207M ($266.9M USD) in Q4 2011 and €247M ($318.4M USD) for the total fiscal year.  

The average selling price of the cash-strapped JV's handsets remained relatively stable between 2010 and 2011 (albeit fluctuating on a quarterly basis).  But sales and gross margins distinctly declined, leading to the net loss.  Sony Ericsson blames this on "intense competition" and complains in its earnings report of "price erosion".

The firm moved €1.28B ($1.65B USD) in product in calendar Q4 2011, down almost €300M ($386.8M USD) from a year before.  Overall, Sony Ericsson in 2011 dropped in global revenue from €6.3B ($8.12B USD) to €5.28B ($6.81B USD), a decline of approximately €1.0B ($1.29B USD).  Sony Ericsson shipped nearly 2 million units (phones) less than it did the year before.

Sony Ericsson is having its very own Eurozone debt crisis. [Image Source: The Hibernia Times]

There is mild interest for the company's smartphones, which play on some of Sony's most iconic historical products, such as the Walkman and the Sony PSP.  However, these devices -- while well differentiated in legacy and form factor -- have curiously weak (sort of the opposite of Altoids™) hardware.

Sony Ericsson brags that the company has moved 28 million Xperia phones since the platform's introduction in mid-winter 2008.  However, most of these sales came during the more prosperous 2009 and 2010 seasons.

Sony Ericsson does have the unique advantage of being able to throw Sony's unique titles from its older PlayStation/PlayStation 2 console gaming library at its mobile devices.  But at the end of the day, it's simply not selling enough product to stay viable.

II. The Road to Recovery

Sony, the new full owner as of this month, will have its work cut out for it trying to restore the firm to its prosperity it enjoyed before the smartphone era -- at a time when its color screen and built-in digital camera were novel enough to earn the company's lineup substantial market share.  Sony Ericsson was once the world's fourth largest phone maker in 2009, but much has changed for the worse.

The next big thing for Sony Ericsson hardware-wise is the Xperia NXT family of Android phones.  Unveiled at CES 2012, the first of these phones -- "ion" -- is Sony Ericsson's first legitimate Android "superphone", packing a 1.5 GHz dual-core processor, 16 GB of NAND storage, a 12 MP camera capable of shooting 1080p HD, and a 1280x720p display to view your work on.  It will land on AT&T, Inc.'s (T) U.S. network, likely in Q2 2012 [source].

The Sony Ericsson Xperia NXT ion
The Sony Ericsson Xperia NXT ion is the phonemaker's first serious Android superphone to make its way to America. [Image Source: Euronews]

The big question will be whether this slick and powerful handset and the company's new ownership will be enough to right the ship at Sony Ericsson.  The company was forced to take a €93M hit on "restructuring costs" aka "layoffs".  While Sony is doing much better -- respectively -- compared to its struggling JV, Sony is also lagging key smartphone competitors like Samsung Electronics Comp., Ltd. (KS:005930) in research.

Source: Sony Ericsson

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I disagree
By bug77 on 1/19/2012 3:11:03 PM , Rating: 2
Sony, the new full owner as of this month, will have its work cut out for it trying to restore the firm to its prosperity it enjoyed before the smartphone era -- at a time when its color screen and built-in digital camera were novel enough to earn the company's lineup substantial market share.

As far as I remember, Sony's phones were never anything but bland. Ericsson on the other hand used to be pretty successful, but by the time of the merger they were already falling behind Nokia. We'll see how things work out this time, but I'm not holding my breath for Sony (personally I wouldn't touch one of their phones with a 10 feet pole, but that's irrelevant to them).

RE: I disagree
By aebiv on 1/19/2012 4:15:24 PM , Rating: 2
Their Android handsets have been pretty solid, and far more "AOSP" than most of the manufactures. The problem has been though that generally they are a cycle behind everyone else in specifications, and they're rarely on the US carriers.

With their recent workings with the CyanogenMOD community, a flagship device and the right marketing could be a great step forward for them...

...and I'm not a Sony fan at all...

RE: I disagree
By bug77 on 1/19/2012 5:04:29 PM , Rating: 2
Their Android handsets have been pretty solid...

The handsets, yet, but the support was pretty much zero. As in no updates at all. Recently they announced their entire 2011 lineup will receive ICS, which would be an incredible turnaround, but we have to see it happen first.

RE: I disagree
By aebiv on 1/19/2012 6:47:54 PM , Rating: 2
Updates for anything other than a Nexus and anything from Asus seem to be vaporware for everyone, so it goes without saying ;)

RE: I disagree
By Aries1470 on 1/19/2012 8:01:34 PM , Rating: 3
It seems that you do NOT know the FACTS!!!

I had owned their 1st XPERIA Android the X10, and would have loved to still have it!!! I got it with 1.6, then updated to 2.1.
We were told no more updates... then lo and behold, they did. 2.3.
An old phone with great hardware ( when made ) that I still miss, only because it had failed to update and became bricked and the insurance tech guys buggered it up and said that there was a 'aminboard' problem with the phone and they ended up giving me a CRAPPY Samsung Galaxy S!
The S.E. did EVERYTHING THAT I NEEDED IT TO DO. Plus it had support, way past most manufacturers!
I was able to take TERRIFIC PANORAMIC PICTURES where you would just move your wrist around and it would record and then make a panoramic image.
The camera quality was faultless, it had many other hardware that was great!

So please O.P. and you, before you type, check your facts!!!

The only saving grace for the Samsung, is that it has 16GiB of internal memory plus SD slot to expand even more.

This was their ORIGINAL Flagship.

Don't beleive me, here is a link:

There, did the hardwork for you too ;-)

RE: I disagree
By Aloonatic on 1/19/2012 5:10:11 PM , Rating: 2
SE handsets, just before the smartphone boom, were very good. The K800/W800 series were very popular, with decent cameras and sound quality as well as being half decent MP3 players.

Then they missed the smartphone bus and ended up (constantly) being a few months behind in the smartphone race, which may as well be years.

They might have got away with it, had they released something stellar. However, their first major Android handset was stuck with an older version of Android (compared o other phones out at the same time) because of their timeline (or whatever it's called) skin and they also had a non-multi-touch screen too, which people didn't like.

Since then, they've been also rans and not the go to device, which they really could have been, but I think they suffered from the same problem that many other tech companies suffer from in a fast changing world.

Just like Kodak (who filed for bankruptcy protection earlier today) SE and Nokia were successful in the old world that their devices flourished in, and didn't want to accept that the world was changing, so help off and have not been able to catch up with reality.

All the bad press that Sony have had since the K800 days probably hasn't helped too, and Sony's stock has just gone down in general for a lot of people, who have grown sick of the proprietary memory and cables, that they will put up with for products they think are worth it (like the iPhone/iPod) but wont when the shine has gone.

It's going to be a looooong road back for them if they want to get back near the top.

RE: I disagree
By Paj on 1/23/2012 7:10:57 AM , Rating: 2
Agreed. I had a z800i a few years ago and was supremely happy with it - had a lot of innovative design features that set it apart.

Then the iphone hit, and everything changed.

To be honest I dont see then getting back into the race any time soon. Their new flagship phone may turn things around for them, but they've lost a lot of mindshare that they might not be able to get back. The Xperia play was a good idea, but woefully underpowered compared to some of the other phones that were coming out at the same time. For a phone built primarily around gaming, that's not good.

Just goes to show how fast things can change in the consumer hardware market.

Tony Swash comment
By spread on 1/19/2012 5:30:26 PM , Rating: 2
Wa wa wa the iPhone is better wa wa wa it loves me and tucks me in at night wa wa wa wa I have wet dreams about my dead crush Steve Jobs wa wa wa I have a Steve Jobs dildo wa wa Apple profits are better wa.

- Tony Swash

By CZroe on 1/19/2012 7:02:46 PM , Rating: 2
I'm very much enjoying my Xperia PLAY 4G that I got in November, AFTER getting rid of the AT&T crap that cause it to be slow, unstable, and unusable out of the box. I wouldn't want one of the latest, greatest phone if I had to sacrifice my gamepad controls and ICS is just icing on the top.

"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein

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