Sony needs smartphones in battle for the living room

The company needs to round out its product line

The battle for the living room is heating up, and Sony needs to take over Sony Ericsson in order to better compete with the likes of Samsung and a more aggressive Apple as home electronics sector products become increasingly converged, according to analysts.

On Thursday, the Wall Street Journal reported that the company is nearing a deal to buy out Ericsson's stake in Sony Ericsson, which this year celebrates its 10th anniversary.

Home electronics vendors are looking for ways to differentiate themselves from the competition, and offering an integrated user experience across tablets, smartphones and the living room TV is one of the ways they hope to that, according to IDC analyst Francisco Jeronimo.

"Everyone is trying to dominate the living room," said Jeronimo.

In addition to product differentiation, integration across different product categories also give vendors new content opportunities. Today, Samsung is the best-positioned with its TVs, smartphones and tablets, according to Jeronimo. But Apple is also a force to be reckoned with, he said. The company has the iPhone, the iPad and AppleTV, and there are rumors is planning to launch smart TVs based on iOS, as well.

Sony has already TVs, and has been showing a growing interest in mobile devices with the launch of Android-based tablets and the upcoming PlayStation Vita, which will be available in a 3G version.

A Sony takeover of its joint venture with Ericsson is a deal that some think should already have happened: "This is something Sony should have three or five years ago," said Ben Wood, director of research at CCS Insight.

Getting control of Sony Ericsson isn't just about convergence. With the right products, the smartphone sector itself can be highly lucrative. For example, Samsung saw 45 percent of its profit come from its telecommunications division during the second quarter, according to Wood.

"If you are a consumer electronics giant like Sony, you need to be doing this and you need to have been doing it for a while," said Wood.

Sony has had to see many of its most valuable assets, including cameras, music players and gaming platforms, be subsumed by the smartphone, according to Wood.

Following the avalanche of recent lawsuits in the smartphone space (including Apple versus Samsung; and Oracle versus Google) intellectual property and patents have become a key ingredient of any mobile deal.

"Ericsson holds the keys to that part of the kingdom in this partnership, and if there was a move by Sony on Sony Ericsson, that is going to be on of the most critical elements of the negotiations," Wood said.

Today, neither company is happy with how Sony Ericsson is performing, according to Jeronimo. Sony Ericsson has been trying to reinvent itself as a smartphone-focused vendor using Google's Android OS, but has struggled to compete with Apple and Android stalwarts HTC and Samsung.

During the second quarter, Sony Ericsson reported a net loss of €50 million (US$67 million), in part because the company was affected by the Japanese earthquake. But even though the company has increased the number of devices it offers, Sony Ericsson still trails the competition on high-end smartphones. For example, it still hasn't launched a product powered by a dual-core processor. So something needs to change. Sony needs to either "deepen the relationship with Sony Ericsson and become more proactive in the management of the joint-venture, or, as rumors are suggesting, go for a full take-over," said Wood.

However, a Sony takeover is not a sure thing, as very few things are in the supercompetitive smartphone market.

"The question is whether Sony will be able to fully understand the phone business. But I guess, after all these years working with Ericsson it should be able to take over," said Jeronimo.

Ericsson didn't want to comment on a possible deal with Sony on their joint-venture, only saying that it makes sense for the two companies to talk, according to a spokesman. Sony didn't reply to questions about the report.

Send news tips and comments to mikael_ricknas@idg.com

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Tags EricssonSony Ericsson Mobile Communicationsconsumer electronicsAndroidsmartphonesTVssony

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Mikael Ricknäs

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