Sony is set to enter the Smartphone market without traditional partner Ericcson after the struggling Japanese Company came up with $1.5 billion to buy out their long-time partner.
And in the same way that they were late entering the flat panel TV market, where they are still to make a profit, Sony is late entering the mobile market a move which analysts are saying is a high risk strategy that could fail.
The divorce from Ericsson after a 10-year marriage comes at a time when the Sony Ericsson relationship was floundering.
Several analysts are sceptical that Sony can actually turn the handset business around.
During the past 3 years Sony Ericsson has ceded a significant amount of market share to competitors like Samsung HTC and Apple. They were slow to offer as smartphone and when they did consumers rejected it.
“It’s not clear to me that Sony has the juice or the positioning to make a comeback now,” said Roger Kay, an analyst at Endpoint Technologies.
Once one of the five largest mobile phone vendors in the world Sony Ericsson of late has largely fallen off the radar due to slumping sales and a lack of interest in devices like the Xperia X10.
According to Gartner the Company has just 3.6 percent, of the mobile phone market Apple 18.2 percent, while arch rival Samsung has 15.8 percent of the market. Early Android adopter HTC has10.2 percent.
Sony Chairman Sir Howard Stringer said last night “Acquiring the smartphone division will help us to connect all our devices”
When asked on how he anticipated the alliance would help in the fight against the likes of Apple and Microsoft, Stringer pointed to the content Sony already owns and how being able to port that across the full range of connected devices is crucial:
“It’s a connected world that we’ve finally connected, and I think in the last year people have finally stopped asking me ‘Why do you own content?’.
Sony and Ericsson got together in 2001 because neither company had a particularly strong mobile devices business. Sony’s share in the global market was nearly non-existent, and Ericsson’s own business suffered from major losses. The idea was to wed Sony’s consumer electronics expertise with Ericsson’s experience in telecommunications and wireless technology while reducing its financial liabilities.
Sony Ericsson got off to a weak start, moving slowly to produce any noteworthy products and failing to hit its targets for profitability for the first few years.
CNet said that by 2005, the company had hit its stride by producing a music-centric Walkman-branded mobile phone, and eventually following up with phones using the Cybershot camera brand and Bravia television brand. Much of the progress made by Sony Ericsson was lost once Apple and its iPhone came on the scene in 2007. The iPhone, followed by the first Android device, the G1 from HTC, which was unveiled in October 2008, put consumers on path to demanding more from their mobile devices.
Along the way Sony and Ericsson have witnessed some monumental failures.
The Xperia Play, a strange mash-up of a Sony Ericsson phone and Sony’s PlayStation controller, was supposed to be its break-out hit in the mobile phone market. Instead, it flopped as consumers embraced more conventional devices.
“In short, we don’t see a change in the competitive landscape,” said Shaw Wu, an analyst at Sterne Agee.
The much tipped deal sees Sony Ericsson become a wholly-owned subsidiary of Sony, and its smartphones and other devices integrated with Sony’s wide array of digital content, including music, movies and PlayStation games.
The move is “the beginning of something which I think is quite magical,” Sony chairman 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 online entertainment”.
In its statement, Ericsson – a company better known for its telecommunications networking equipment (it built Telstra’s Next G and LTE networks among many others) – pointed out that the mobile phone market has changed dramatically over the past decade.
It said the mobile market had shifted focus from simple mobile phones to smartphones with advanced computing capabilities, and the company no longer saw obvious synergies in having both a technology portfolio and a handset operation. While neither party mentioned it, the partnership has had problems trying to compete with more innovative entities like Apple with its iPhone and some of the more advanced Android vendors like Samsung and HTC.