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Today, Ericsson announced that it is selling its 50% stake in Sony Ericsson Mobile Communications AB (Sony Ericsson) to Sony Corporation (Sony). Ericsson will gain EUR1.05 billion from the sale, pending regulatory approvals.

Sony’s executive deputy president, Kazuo Hirai, reiterated the importance of smartphones to Sony’s overall strategy only a week ago before the sales announcement. With the buyout, Sony can finally offer consumers a full suite of products and services with content (movies and music), internet enabled TVs, tablets and laptops and now, smartphones. Ericsson’s partnership meant that Ericsson would be primarily focused on mobile phone sales, not allowing the business to bleed while benefitting Sony’s other business divisions.

For Ericsson, the sale means cash, allowing the company to focus on its core business in networks, multimedia solutions and telecom services. With uncertainties clouding the global economic situation, the cash reserves will equip Ericsson with additional financials for acquisitions. At the same time, Ericsson will not be distracted by the fast-paced consumer domain.

In the short term, Sony will not be able to break Samsung and Apple’s stranglehold in the smartphones arena. Euromonitor International expects Sony’s smartphones sales to decline in the forecast period as the company weeds out low margin feature phones. Margins could also be affected as Sony tries to push smartphones as a Trojan to stimulate sales of internet enabled TVs and music and video services.

 

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