Ericsson Buyout Won’t Put Sony Over the Top

Forget handsets -- Sony's best shot at success is redefining its role in the mobile space

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With a majority of the worldwide smartphone market, Google’s Android operating system has caused other phone makers like Research In Motion (NASDAQ:RIMM) and Nokia to decline in prominence, but it also has created a fractured market for manufacturers using the platform. In the overall mobile market, smartphones and feature phones included, Sony Ericsson’s Android business plays an ever-diminshing role.

According to an August report on the worldwide mobile market from Gartner, Sony Ericsson controls below 2% of the mobile market, down from 4.3% in 2009. Given, earnings juggernaut Apple only controls 4.6% of the market by number of phones sold, so a small share doesn’t equate small business — but it’s important to remember that Apple sells just a couple of smartphone models, whereas Sony Ericsson sells many different types of phones.

In the current market, Sony’s ability to rehabilitate and later grow the Sony Ericsson smartphone business is questionable at best. It would be better served at this point by focusing on specialty devices like the PlayStation Vita and a variety of digital services to milk the most revenue out of the mobile business.

Buy out Ericsson and license Sony Ericsson mobile patents where applicable. Then establish the PlayStation Suite as a central force among all Android devices. Make HTC, Samsung and Google/Motorola-made Android phones PlayStation-certified devices, and use the brand to milk users for every dime they’ve got on small games and Sony-branded classics. Then incorporate Sony’s numerous other entertainment services — streaming music service Qriocity, music video channel VEVO, Sony Pictures content, etc. — and make your mobile business about service and not phone sales.

Is there a scenario in which Sony could take its Sony Ericsson business and turn it into a player? Maybe, provided it could make a device that was as pretty and functional as an iPhone that cost half as much to make and could sell for even less. Why bother, though, when the company has the potential to redefine its role in the mobile space, which eventually could prove more poriftable?

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.


Article printed from InvestorPlace Media, http://investorplace.com/2011/10/ericsson-buyout-sony-sne-playstation-google-android/.

©2014 InvestorPlace Media, LLC

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