Sony buys Ericsson out of mobile joint venture

Sony has announced its intentions to get back into the smartphone game full-steam, paying €1.05 billion to partner Ericsson to take full control of Sony Ericsson.

Founded just over ten years ago, Sony Ericsson enjoyed initial success with its combination of Sony's experience in the consumer electronics market and Ericsson's long history with communications technology. While initial struggles led to Ericsson threatening to pull out of the deal, a fresh cash injection saw the venture spring into life.

The partnership was so successful that by 2008 the joint company had become the third largest mobile phone manufacturer in the world, behind Nokia and Samsung, thanks to innovative handsets that used Sony's existing and well-established consumer electronics brands including photo-centric Cyber-shot phones and music-oriented Walkman phones.

Since then, the joint venture has struggled. Cracks appeared in 2007 when Apple - itself a name that rivals Sony for recognisability among the affluent consumer electronics crowd - launched the iPhone, leaving Sony Ericsson to watch its handset shipments drop from 30.8 million in Q4 2007 to just 8.1 million in Q1 2011.

With net profits crashing by 97 per cent in 2008, difficult decisions had to be made: around 5,000 employees were laid off, while research and development centres in the UK, US, India, Sweden, the Netherlands and Budapest were all closed.

Since the troubles hit, Ericsson has been getting antsy - clearly having flashbacks to its own struggles at the turn of the millennium - while Sony has been attempting to revive sales by taking on Google's popular Android platform and creating the PlayStation-branded Xperia Play handset.

That's something which could turn the company's struggles around - and Ericsson appears happy to leave its partner to it.

The deal, announced today, sees Sony pay €1.05 billion to Ericsson to buy it out of the partnership altogether. "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," claimed Sony boss Howard Stringer of the deal.

As well as complete control of the Sony Ericsson brand, Sony gains an impressive patent portfolio with a major focus on wireless communications and smartphone technologies - something that could come in handy as and when Microsoft comes knocking for its Android 'licensing' fee.