Sony Corp, Japan’s largest exporter of consumer electronics, yesterday fell after a newspaper reported the company was close to an agreement to buy Ericsson AB’s stake in their mobile phone venture.
The shares declined 3.7 percent to ￥1,415 in Tokyo, underperforming Japan’s benchmark Nikkei 225 Stock Average, which gained 1 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 yesterday, citing people familiar with the matter.
The 50 percent stake could be valued at 1 billion to 1.25 billion euros (US$1.3 billion to US$1.7 billion), 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 by telephone yesterday. “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.
“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.
Nomura Holdings Inc, Japan’s biggest securities brokerage, cut its target price for Sony by 41 percent to ￥1,650 and lowered the rating for the stock to ‘‘neutral” from “buy” in a report on Thursday, citing macroeconomic 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 on Thursday.
Sony Ericsson reported its first quarterly loss in more than a year on July 15. CEO 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 shipped 7.6 million handsets in the second quarter, falling short of the 9.1 million estimated by analysts.
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