Sony (NYSE: SNE) has declined to comment on reports that it is considering a bid to buy out Ericsson (NSDQ: ERIC) from its Sony Ericsson handset joint venture as the company’s stock dropped in trading today.
The WSJ’s report yesterday, citing unnamed sources, claimed Sony wanted to buy out Ericsson from its JV.
An analyst quoted by BusinessWeek estimates that Ericsson’s stake could be worth as much as €1.4 billion ($1.9 billion). The JV, which had its 10-year anniversary this past October 1, is up for renewal this month.
Neither Ericsson nor Sony have commented on the report. This from Sony (via Reuters): “Sony has made no announcement in this regard and has no comment.”
A buyout might make some strategic sense for both companies: Ericsson has been focused on developing its services, networking and equipment business; while Sony has been getting increasingly involved in portable consumer electronics devices, launching several on its own steam rather than via the JV. These include the PSP and its new line of Android-powered tablets.
The market, however, doesn’t seem to see it this way: BusinessWeek reportes that today both Sony’s and Ericsson’s stocks have been trading lower. Sony was down 3.7 percent in Japan, while Ericsson was down 0.6 percent in Sweden. It appears that although a product alignment might make strategic sense, it could also have a big effect on Sony’s bottom line, not just to buy Ericsson out but to subsequently license Ericsson patents to use in the devices.
When the JV was first formed, the mobile world was a significantly different place: the chief aim at the time was to combine forces to overtake Nokia (NYSE: NOK) as the world’s largest player in the market. At the time Ericsson was still among the top-five of all handset makers. Today, the JV is at number-10, with a 1.7 percent share of the market, as it looks to gradually cease making feature phones and move entirely over to an Android-based smartphone portfolio. It’s hoping that a launch of several new handsets in its Xperia range will turn those fortunes around.
The company, however, is facing several challenges in that turnaround, as we detailed here.