Sony promises magic as it buys Ericsson out of mobile venture

Sony hopes to bewitch the smartphone market after it paid €1bn (£881m) to buy Ericsson out of their 10-year mobile joint venture. The group said its renewed challenge to Apple, HTC and Samsung was the start of something "magical".

The day after Nokia announced its return to the smartphone battleground with its first Windows Phone, Sony announced it had agreed to buy its partner out of the Sony Ericsson joint venture. The Japanese group said that the move would add the "final piece of the jigsaw" to its consumer electronics business.

Sir Howard Stringer, the chief executive of Sony, said smartphones were the "next logical step" in the company's four-screen strategy of offering tablets, PCs, TVs and now phones.

Sir Howard said a taskforce led out of Tokyo had been created to draw up a strategy as well as change the branding. "It's the beginning of something quite magical," he added.

Analysts at CCS Insight said: "This gives Sony ownership of a key mobile asset, but major challenges remain."

The company hopes to challenge smartphone rivals by offering its content on the devices. "Competitors don't have our movies, television and games; we can use our content as a weapon to drive sales," Sir Howard said, before claiming that its latest smartphone, the Xperia, was "better" than the iPhone 4GS. The company is likely to phase out feature phones to concentrate fully on smartphones. He admitted: "We do have some catching up to do."

Sir Howard said: "There will be a lot of operational efficiencies, R&D efficiencies and marketing efficiencies."

The deal also includes an important cross-licensing agreement of intellectual property and five patent families.

Hans Vestberg, president and chief executive of Ericsson, said the venture, which had been signed in October 2001, had taken "a lot of foresight" by the executives who set it up. But he said that the market had changed as had Ericsson's priorities. He added that yesterday's deal allowed Ericsson to focus on its core wireless business.

A decade ago, the partnership combined two unprofitable handset businesses, but together the group became one of the most popular feature phone makers. However, like Nokia, Sony Ericsson, which currently employs 7,500, struggled to compete following the arrival of the smartphone.

Paul Lambert, a senior analyst at Informa Telecoms & Media, said: "The move makes sense for Sony as the company will try to capitalise on full-ownership of the handset JV by aggressively integrating Sony Ericsson smartphone technology into its range of network-connected consumer electronics devices."