The partnership was formed in 2001 with the goal of producing the killer cell phone, but it never became an ideal union. According to Ericsson's CEO, Hans Vestberg, the thinking 10 years ago was, "...it was a perfect match to drive the development of feature phones."
But twixt cup and lip...
A perfect match? Not quite. The Motley Fool's Todd N. Lebor wasn't too crazy about the partnership back in 2001. He wrote: "The Ericsson/Sony deal seems a little too back-of-the-napkin to me ... [It] doesn't provide any immediate advantages or -- I apologize in advance for using this word -- synergies the way, for example, merging two drug companies does."
And it had mighty competition to deal with, such as Nokia, king of the cell phone makers at the time, as well as Motorola, Samsung, and then Research In Motion. Sony Ericsson just never managed to wrest consumers away from those companies.
It got worse: After Apple introduced the iPhone, Sony Ericsson started losing even the shallow toehold it had chiseled out. Producing phones that ran on Google's Android OS couldn't help, either. Its 4.3% share of the smartphone market in the third quarter of 2009 dropped to 1.7% in this year's second quarter.
If Sony had put more thought into it at the time, would it have even chosen Ericsson as its partner? It wasn't even predominantly a cell phone maker; "...Ericsson derives less than 15% of its revenues from handsets while Nokia pulls in over 70% from mobile phones," Lebor wrote at the time. "Ericsson is a wireless network infrastructure company."
The year of magical thinking
Sony Chairman Sir Howard Stringer said of the split, "It's the beginning of something which I think is quite magical."
I can only think that Sir Howard refers to the almost $1.5 billion that will magically disappear from Sony's coffers. What will Sony get for their money? Five patent families. Nokia, in comparison, has over 10,000.
Sir Howard later rationalized the deal a bit more concretely: "We can more rapidly and more widely offer consumers smartphones, laptops, tablets and televisions that seamlessly connect with one another and open up new worlds of online entertainment."
CEO Vestberg told us what he thought of the original match-up. Here's what he thinks of the divorce: "Today we take an equally logical step as Sony acquires our stake in Sony Ericsson and makes it a part of its broad range of consumer devices."
That "logical step," for Ericsson, anyway, would be, as Vestberg told Reuters, to use the cash from the sale to bolster its treasury. There are no plans for a shareholder distribution.
Frankly, I think Ericsson got the better end of this deal.
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Fool contributor Dan Radovsky has no financial interest in the above-mentioned companies. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Apple and Google, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.