Why Would Sony Want Sony-Ericsson?

Sony-Ericsson is one of the great losers in the smartphone race, which has largely been won by Apple (NASDAQ: AAPL) and Google’s (NASDAQ: GOOG) Android-based phones. Yet, Sony (NYSE: SNE) foolishly wants to buy out its handset joint venture partner Ericsson. Sony is likely to regret this decision, along with a number of others it has made recently.

Reuters reports that Sony believes it can use its game and media platforms to revive the sales of smartphones, if only it can take complete control of the design and marketing of products currently controlled by the joint venture. That assumes the huge Japanese consumer electronics company can combine hardware, software and content in ways it has not been able to do in the past.

Sony does have considerable media assets because of its ownership of one of the world’s largest studios. It has a huge base of game consoles, led by its PS3 platform and supported by video game products and premium content. Sony also has its decades-old brand, which, based on a series of strategic blunders, may not be worth much any more.

Sony has failed to take advantage of its brand as it has allowed other companies to overwhelm its market share in the PC, camera and e-reader operations. The Sony Vaio has such a small part of the personal computer market that it is barely measured in the single digits worldwide. It has not been able to effectively compete with Dell (NASDAQ: DELL), Hewlett-Packard (NYSE: HPQ) or China-based firms Acer and Lenovo. Sony has not been able to effectively hold its ground in the digital camera market against other Japanese and Korean manufacturers, despite its brand.

Sony’s reason to buyout Ericsson is based on a mistaken notion. That is that it can take its group of second-tier products and use them to lift the prospects of a third-tier smartphone operation.

Douglas A. McIntyre