Sony Buys Out Ericsson for $1.47 Billion
October 27, 2011 9:46 AM
Sony has described the buyout as "magical"
Mobile devices like smartphones and tablets have
become an essential part
of many people's everyday lives, and for that reason, Sony is absorbing the entirety of its mobile partnership with Ericsson.
Reports in regards to
Sony's interest in taking over
started circulating earlier this month, with analysts estimating that the deal could be worth around $1.3 billion. But now, it has been announced that the buyout price is $1.05 billion euros, or $1.47 billion.
Currently, Ericsson phones have no connection with Sony's content despite the mobile joint venture between the two. Sony has a music label, a movie studio and of course the PlayStation gaming systems like PS3, PSP and the
upcoming PS Vita
. The company is looking to link this content with the Ericsson phones, much like Apple, which makes its own devices (i.e., the iPhone) and connects them with similar operating systems and programs, such as iTunes.
In fact, Sony is even beginning to sound like Apple, referring to the $1.47 billion buyout of Ericsson as "magical."
"It's the beginning of something which I think is quite magical," said Sir Howard Stringer, Sony chairman. "We can more rapidly and more widely offer consumers smartphones, laptops, tablets and televisions that seamlessly connect with one another and open up new worlds of online entertainment."
Sony will receive ownership of five wireless handset patent families as well as an intellectual property cross-licensing agreement that covers all of the company's products and services. Stringer noted that ownership of such patents will lead to a reduction in costs in the way of operations, R&D and marketing.
In addition, Sony could potentially make up for
in the smartphone race. But that doesn't mean that there aren't obstacles ahead for Sony.
"Sony had to make this deal as it had run out of options, but integration challenges could prove to be a major hurdle," said Ben Wood, head of research at consultancy CCS Insight. "As a major consumer electronics player, lack of mobile assets had become a liability for Sony, particularly when compared with Samsung, whose telecommunication business creates nearly half of its profits."
Hans Vestberg, Ericsson chief executive, plans to use the money from the buyout to "strengthen its balance sheet," but doesn't foresee paying it out to shareholders.
The next step will be to see if Sony can pull it off now that it has all the tools to launch a healthy competition against the likes of Apple and Samsung. But many are skeptical of Sony's abilities after the company took several security hits earlier this year from hackers who
repeatedly targeted Sony
"When an individual makes a copy of a song for himself, I suppose we can say he stole a song." -- Sony BMG attorney Jennifer Pariser
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