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Ericsson and Sony today announced that Sony will acquire Ericsson’s 50 percent stake in Sony Ericsson Mobile Communications (“Sony Ericsson“), making the mobile handset business a wholly-owned subsidiary of Sony. Ericsson will receive a cash consideration of EUR 1.05 billion.

The transaction gives Sony an opportunity to rapidly integrate smartphones into its broad array of network-connected consumer electronics devices and provide Sony with a broad intellectual property (IP) cross-licensing agreement as well as ownership of five essential patent families relating to wireless handset technology.

For Ericsson, a world leading telecoms services company for carriers, their handset operation was something of a distraction.

“This acquisition makes sense for Sony and Ericsson, and it will make the difference for consumers, who want to connect with content wherever they are, whenever they want. With a vibrant smartphone business and by gaining access to important strategic IP, notably a broad cross-license agreement, our four-screen strategy is in place,” said Sir Howard Stringer, Sony’s Chairman, Chief Executive Officer and President. Stringer also noted that the acquisition will afford Sony operational efficiencies in engineering, network development and marketing, among other areas. ”

“Ten years ago when we formed the joint venture, thereby combining Sony’s consumer products knowledge with Ericsson’s telecommunication technology expertise, it was a perfect match to drive the development of feature phones. 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.

Sony Ericsson has recently moved from feature phones to Android-based Xperia smartphones. By the end of the third quarter of 2011, Sony Ericsson held a market share of 11 percent (by value) in the Android phone market, representing 80 percent of the company’s third quarter sales.

The company’s market share has shrunk from 4.3 percent in the third quarter of 2009 to 1.7 percent in the second quarter this year, according to research firm Gartner.

Sony Ericsson, based in London and with 7,500 employees, posted a net profit of around $126 million in 2010 after quarters of losses, reports Fierce Wireless.

The transaction, which has been approved by appropriate decision-making bodies of both companies, is expected to close in January 2012, subject to customary closing conditions, including regulatory approvals. Following completion of the transaction, Ericsson will have no outstanding guarantees relating to Sony Ericsson and will no longer account for Sony Ericsson as an investment on balance sheet.

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