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Edition: U.S. Article Comments (1) Follow Reuters Facebook Twitter RSS YouTube Read Tornadoes leave seven dead in Oklahoma, Kansas | 2:35am EDT Hines Ward scores "Dancing With the Stars" win 12:37am EDT Zuma plans Libya trip to discuss Gaddafi exit: radio | 2:34am EDT San Diego family of 4 found dead in pool and bathtub 24 May 2011 Democrat Kathy Hochul wins upstate New York race 12:11am EDT Discussed 326 Obama and Netanyahu face tense meeting on Mideast 125 As hours tick by, ”Judgment Day” looks a dud 105 Broadcaster silent as Judgment Day hours tick by Watched Deadly Missouri tornado captured on video Mon, May 23 2011 Scientists revive ancient spider in stunning 3D detail Tue, May 24 2011 The business of managing old age 3:22am EDT Analysis: Sony Ericsson needs Sony firepower for Android war Tweet Share this By Simon Johnson and Tarmo Virki STOCKHOLM/HELSINKI (Reuters) - Japan's Sony needs to assert control over Sony Ericsson if the handset joint venture is to recoup market share and relevance in the cut-throat world of mobile devices. Last year the... Email Print Related News Sony shares up on forecast, but more hacks found Tue, May 24 2011 Sony to post $3.2 billion annual loss on tax write-offs Mon, May 23 2011 Special Report: Sony stumbles: Did Stringer's makeover fail? Mon, May 23 2011 Mobile hacking sets off security gold rush Wed, May 18 2011 HTC to tap tablet boom with many models Tue, May 17 2011 Analysis & Opinion Tech wrap: Microsoft carts out Mango phone OS Tech wrap: Sony takes a $3.2 billion beating Related Topics Technology » Media » Japan » iPad » Sony Ericsson phone models Vivaz Pro, Xperia X10 Mini Pro and Xperia X10 Mini (L-R) are displayed at the Mobile World Congress in Barcelona February 15, 2010. Credit: Reuters/Albert Gea By Simon Johnson and Tarmo Virki STOCKHOLM/HELSINKI | Tue May 24, 2011 7:09pm EDT STOCKHOLM/HELSINKI (Reuters) - Japan's Sony needs to assert control over Sony Ericsson if the handset joint venture is to recoup market share and relevance in the cut-throat world of mobile devices. Last year the 10-year-old venture set itself the ambitious target of capturing the market for Google's Android platform, the world's most popular smartphone software, in order to rake in returns from the fast-growing and profitable market. But to reach its goal, Sony Ericsson needs a dynamic owner with deep pockets and multimedia assets. Its brand is languishing by comparison with Apple Inc, whose iPhones and iPads have wowed gadget-hungry consumers. A full takeover of the venture with Sweden's Ericsson would boost Sony's overall offering, which includes content, gaming devices, consumer electronics and even tablet computers, but is still missing its own smartphones. "Sony has not seemed interested so far in making such a move, but now the full offering story is very, very 'in', and Sony might be looking at Apple and thinking they could come up with a similar offering," Gartner analyst Carolina Milanesi said. Sony and Ericsson's 50:50 venture -- formed in 2001 -- thrived after its breakthrough with Walkman music phones and Cybershot cameraphones, both of which leveraged Sony's brands. But it lost out to leaner rivals at the cheaper end, and its share of total handset sales dropped to just 3 percent from more than 9 percent at its height. Now, Sony Ericsson is pinning its hopes on a switch in focus to smartphones, the fastest-growing part of the mobile market, and particularly phones powered by Android. It is making some progress and turned a net profit of 90 million euros ($127 million) last year, after a booking a loss of 836 million euros in 2009. JAPANESE COMPLICATIONS In order to snare new customers, Sony Ericsson needs access to Sony's popular content. This includes PlayStation, a music catalog including artists Justin Timberlake and Bob Dylan, and movies and TV shows like popular U.S. comedy "Seinfeld." It has taken steps in that direction already. It recently rolled out the Xperia Play smartphone which gives users access to PlayStation games. But its product was late and expensive and is being undermined by parent Sony, which is rolling out other products in direct competition. Sony recently launched a tablet computer that runs on Android software, as well as an own-brand portable gaming device. It also plans to franchise PlayStation to other phone makers. Nobuo Kurahashi of Mizuo Investors' Securities said it made far more sense for Sony to roll Sony Ericsson into its strategy rather than competing with it. "Having Sony Ericsson phones involved (separately) could make it harder for Sony to achieve its goals," Kurahashi said. "Having ... the whole thing under their control could well make it easier to build their network strategy." But it won't be easy, with Sony distracted by headaches elsewhere. This week, Sony said it would make a $3.2 billion net loss for the fiscal year that ended March 31 due to the effects of March's earthquake in Japan. The company had already been struggling, outmaneuvered by Apple in portable music and Samsung in flat-screen TVs and challenged by Nintendo and Microsoft in the battle for dominance of video game consoles. It also faces a massive undertaking to recover customer trust after hackers accessed client data from its online gaming platform in April. "Given the enormity of Sony's current challenges, a move for Sony Ericsson in the short term seems unlikely," said CCS Insight analyst Geoff Blaber. SILENT SWEDISH PARTNER The impetus may come instead from partner Ericsson, which could push Sony to buy it out if their joint venture continues to fade in relevance. Sony Ericsson finally turned a profit last year, but that may not last, given the odds currently stacked against it. "I think it (Sony Ericsson) is already fairly irrelevant in the market in terms of volumes and even value market share," said WestLB's Thomas Langer. However, Ericsson has no urgent need for the 1 billion to 2.5 billion euros some analysts reckon half of Sony Ericsson's equity is worth, based on its revenues of 6.3 billion euros. Debt would not be an issue, since the venture had net debt of only 5 million euros at the end of March. Meanwhile, Ericsson's own core business is soaring as telecom operators raise spending to boost capacity in networks choked by smartphone customers. It has also made joint ventures part of its targets for the 2010-2013 period, possibly signaling no sale is on the cards. Even if Sony Ericsson does sort out its ownership issues, the going will be tough. The smartphone market is growing fast, with shipments nearly doubling year on year in the first quarter to 100 million handsets, according to IDC's mobile phone tracker report. But competition for a larger slice of the pie is fierce, and Sony Ericsson will not only have to battle deep-pocketed, larger rivals like Samsung Electronics, but also nimbler Asian players such as HTC, China's ZTE and Huawei. Sony Ericsson has 9 percent of the market for smartphones running on Android software, compared with 26 percent for Samsung, according to researcher Strategy Analytics. Eight analysts polled by Reuters all thought Sony Ericsson would likely miss its target of becoming the biggest seller of Android. Some say that makes it all the more important for Sony to take stronger ownership. "Sony needs a mobile presence, and Sony Ericsson needs Sony content and services. This can arguably only be achieved if Sony takes control of the joint venture," said CCS Insight's Blaber. (Additional reporting by Isabel Reynolds in Tokyo; Editing by Sophie Walker and Alexander Smith) Technology Media Japan iPad Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language, all capital letters or appear to be spam, and we review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. Comments (1) paul5243 wrote: Sony Ericsson has been doing a lot of great things recently. I think it CAN achieve its goal to be the #1 in Android, but it needs the investment to give it the freedom to excel. I don’t think Sony should buy it outright as a lot of the expertise, design excellence and control has been coming from the Ericsson side (and they do a good job). Instead of one side buying it out they both partners need to invest better and commit better – Ericsson’s fortunes reversed with a massive cash pile could do it, but the article is also correct in stating that Sony really need to wise-up and stop undermining it by not committing fully to the joint venture with Sony technologies as it could. I also don’t understand why Ericsson doesn’t try to increase co-operation between Sony Ericsson and its other ST-Ericsson joint venture – maybe some kind of savings could be made if Sony Ericsson stopped favouring Qualcomm chipsets in its latest phones! May 24, 2011 8:39pm EDT -- Report as abuse See All Comments » Add Your Comment Social Stream (What's this?) © Copyright 2011 Thomson Reuters Editorial Editions: Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom United States Reuters Contact Us Advertise With Us Help Journalism Handbook Archive Site Index Video Index Reader Feedback Mobile Newsletters RSS Podcasts Widgets Your View Analyst Research Thomson Reuters Copyright Disclaimer Privacy Professional Products Professional Products Support Financial Products About Thomson Reuters Careers Online Products Acquisitions Monthly Buyouts Venture Capital Journal International Financing Review Project Finance International PEhub.com PE Week FindLaw Super Lawyers Attorney Rating Service Reuters on Facebook Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.

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