SoftBank's first Sony smartphone deal takes aim at U.S. market

By Reuters

Aug 29, 2014 11:45 AM EDT

Japan's SoftBank Corp and its U.S. mobile carrier Sprint Corp will offer a Sony smartphone for the first time, sources with knowledge of the matter said, as the two technology titans confront daunting challenges in the U.S. market.

The deal could give a much-needed boost to Sony's struggling mobile division, which last month said it no longer expected to make a profit in the year to next March. It will also bolster Sprint's handset line-up as it seeks to stem a flight in subscribers.

SoftBank, Japan's second most valuable company, is pushing price cuts and promotions at Sprint while unveiling joint smartphone offerings to shore up the No. 3 U.S. carrier, after U.S. regulators thwarted its hopes for a merger to give it the scale to take on bigger rivals.

Sony, long one of Japan's best-known brands but now struggling to pull its flagship electronics division out of the red, has been unable to gain traction in the key U.S. smartphone market, depressing a mobile unit that it hopes to make a pillar of its revival.

Sony managed only a 2.1 percent share of the global smartphone market in 2013, according to market research firm Gartner, and now faces rising competition from low-cost Chinese smartphones. In the U.S. market, the only carrier offering its handsets is No. 4 T-Mobile US Inc.

Sony will sell a soon-to-be launched Xperia flagship phone in the United States via Sprint, four sources familiar with the matter told Reuters. In Japan, SoftBank will make the phone available in time for the winter holiday season, they added.

Sony and SoftBank declined to comment.


Sony is expected to unveil its next flagship smartphone, the Xperia Z3, at next week's IFA tech expo in Berlin.

But the company remains far behind the big names in the industry: Apple Inc, which is set to unveil its new iPhone 6 next month, and Samsung Electronics Co, which makes the Galaxy series.

"I can't see this making much of a difference," said Deutsche Bank analyst Yasuo Nakane of the Sprint deal, stressing the importance of a deal with a major carrier such as Verizon Communications Inc - along with AT&T Inc one of the top two U.S. carriers - to get critical mass in that market. Sony offers an Xperia tablet through Verizon.

"Even if they put out a phone on Sprint, Verizon is the priority any way you think about it," Nakane said.

Masahiro Ono, an analyst at Morgan Stanley MUFG Securities, nevertheless saw the deal as a move in the right direction.

"They haven't been able to maintain very good relationships with carriers, unlike Samsung who has done very well," he said.

Sprint's aggressive strategy on new handsets and price cuts, with the unveiling last week of a smartphone developed by Sharp Corp exclusive for Sprint and SoftBank, is likely to accelerate under new chief executive Marcelo Claure, plucked from handset reseller Brightstar Corp which SoftBank acquired last year.

SoftBank CEO and founder Masayoshi Son has vowed bold moves by Sprint since a proposal to merge with T-Mobile US was withdrawn early this month.

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