* Sony to pay Ericsson 1.05 bln euros
* Aims to catch up in smartphone race
* Consultant says question remains if Sony can execute plan
* Ericsson increases focus on wirless network equipment
* Ericsson shares up 5 pct, tech sector up 3.4 pct
By Tarmo Virki, European Technology Correspondent
LONDON, Oct 27 Sony Corp is to take
over its mobile phone joint venture with Ericsson for
1.05 billion euros ($1.5 billion), as it seeks to exploit its
music and video to help it catch smartphone leaders such as
Apple Inc .
The deal to buy out its Swedish partner will enable Sony to
better integrate smartphones and other devices with its array of
content, from its music label whose stars include Beyonce and
Britney Spears, its movie studio whose current hits include
Spider Man and Anonymous and its Playstation video games such as
Legends of Norrah.
"Its the beginning of something which I think is quite
magical," Sony Chairman Sir Howard Stringer told a news
conference in London. "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
Until now Sony's tablets, games and other consumer
electronics devices have been kept separate from the phones sold
and created by Sony Ericsson.
"Sony is looking to do the same as Apple and meet users'
demands through linking various devices with similar interfaces
and operating systems," said analyst Nobuo Kurahashi of Mizuho
Investors' Securities in Tokyo.
"Smartphones look to become more important products for
Sony ... and they will probably become the main device people
use to connect to the Internet."
Smartphone sales have been surging since Apple launched its
first iPhone in 2007 and despite a slowdown in the overall
consumer electronics market, strong demand is set to continue.
"More and more people are watching content on smartphones.
TV is not going to go away, but they watch it on smartphones and
they watch it on tablets," Stringer said.
The deal will give Sony ownership of certain handset patents
held by Ericsson and will enable it to cut costs in the Sony
Ericsson business, with Stringer pointing to savings in
operations, R&D and marketing.
The takeover of Sony Ericsson by the Japanese group had long
been talked of and a source with knowledge of the matter told
Reuters this month a deal was in the offing.
"Sony now has all the components to compete with Samsung and
Apple. The big question now is ... can it execute?," said Pete
Cunningham of consultancy Canalys, adding Japanese company
takeovers in Europe and the United States had often struggled.
"Based on history I am sceptical, but I would not say it
cannot be done," he added.
Founded in 2001, Sony Ericsson employs some 7,500 and last
year took around 2 percent of the global cellphone market with
sales of 6.3 billion euros. Initially it thrived with an array
of camera and music phones but it lost out in the smartphone
"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," he said.
Ericsson said the deal provides Sony with a broad
intellectual property cross-licensing agreement covering all the
Japanese company's products and services, as well as ownership
of five essential patent families relating to wireless handset
Shares in Ericsson, which as a result of the deal increases
its focus on the wireless network business in which it is the
world's largest manufacturer, were up 5 percent at 70 crowns by
1153 GMT. The STOXX Europe 600 technology index was up
Ericsson Chief Executive Hans Vestberg told Reuters the
company would use the cash payment to strengthen its balance
sheet and had no plans to pay it out to shareholders.