Sony Corp., Japan’s largest exporter of consumer electronics, fell after a newspaper reported the company is close to an agreement to buy Ericsson AB’s stake in their mobile-phone venture.
The shares declined 3.1 percent to 1,424 yen as of 9:54 a.m. in Tokyo, the biggest drop in Japan’s benchmark Nikkei 225 Stock Average, which gained 1.3 percent.
The two companies held regular discussions in recent years about the ownership structure of Sony Ericsson Mobile Communications AB, though they may fail to reach an agreement, the Wall Street Journal reported today, citing people familiar with the matter. The 50 percent stake could be valued at 1 billion euros ($1.3 billion) to 1.25 billion euros, the report said, citing unidentified analysts.
“The deal could amount to a huge financial burden on Sony,” Hideki Yasuda, a Tokyo-based analyst at Ace Securities Co. in Tokyo with a “neutral” rating on Sony’s stock, said today by phone. “On top of that, there could be a costly fee for using patents reserved by Ericsson.”
Shiro Kambe, a spokesman for Tokyo-based Sony, Ola Rembe at Stockholm-based Ericsson and Holly Rossetti at London-based Sony Ericsson, all declined to comment.
Full control of the venture would add smartphones using Google Inc.’s Android system to Sony’s device business, while freeing Ericsson to concentrate on sales of wireless transmission equipment and services. Sony Ericsson already makes a smartphone with a slideout gaming keyboard that has functions similar to Sony’s Playstation game system.
‘No Point’
“This would make sense for both Ericsson and Sony,” said Haakan Wranne, a Stockholm-based analyst at Swedbank Markets, who said a deal may value Ericsson’s 50 percent stake at as much as 1.4 billion euros. “The current venture doesn’t maximize the potential of Sony’s presence and assets in gaming, and is diluting what could be a bigger-profile Sony offering.”
“‘There is no point’’ for Ericsson to ‘‘remain involved and bear the risk of having to pay additional funds to the joint venture,’’ said Pierre Ferragu, an analyst at Sanford C. Bernstein.
Ericsson and Sony formed the joint venture on Oct. 1, 2001, giving themselves five years to dethrone Nokia Oyj as the world’s biggest mobile-phone maker. Nokia is still the biggest handset maker by units, while Apple Inc. and Samsung Electronics Co. passed it in the smartphone market in the second quarter, according to Strategy Analytics.
Rating Cut
Nomura Holdings Inc., Japan’s biggest securities brokerage, cut its target price for Sony by 41 percent to 1,650 yen and lowered the rating for the stock to ‘‘neutral” from “buy” in a report yesterday, citing macro-economic pressure on earnings and difficulties for Sony in reducing costs further.
Nomura also lowered its industry outlook for the Japanese consumer electronics industry to “neutral” from “bullish.”
Macquarie Group Ltd. also lowered its target price for the stock by 11 percent to 1,600 yen yesterday.
Sony Ericsson reported its first quarterly loss in more than a year on July 15. Chief Executive Officer Bert Nordberg said at the time the company was ramping down its feature phone business as the worldwide market for handsets without smartphone software was “collapsing.”
The company’s efforts to replace its aging smartphone portfolio with updated models such as the Xperia Arc were dented by supply-chain disruptions following the Japanese earthquake and tsunami in March. The company shipped 7.6 million handsets in the second quarter, falling short of the 9.1 million estimated by analysts.
Sony Technologies
The company’s phones use Sony technologies produced in northern Japan, such as camera sensors, displays and batteries.
Sony Ericsson was the world’s 10th-biggest handset manufacturer in the second quarter with a 1.7 percent share, according to market researchers Gartner Inc. It had a 3 percent share a year earlier. Bigger competitors in the Android segment include Samsung, HTC Corp., and Motorola Mobility Inc., which was acquired this year by Google for $12.5 billion.
Ericsson can’t expect “to get anywhere close to that amount,” Swedbank’s Wranne said. Google was keen to get Motorola’s intellectual-property holdings “and was prepared to pay up for it.” Sony is also the only realistic buyer for the stake and Ericsson therefore “doesn’t have the opportunity to play this one out.”
Sony Ericsson has more than 4,000 of its own telecom patents and has a license to all the Nortel Networks Corp. patents that were auctioned this year, Gustaf Brusewitz, a spokesman for the joint venture, said in August. Both Ericsson and Sony were part of a group, which also included Apple and Microsoft Corp., that agreed in July to pay $4.5 billion for a portfolio of patents from the breakup of Nortel to keep them out of Google’s hands.
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