Sony Corp is to take over the Sony Ericsson mobile phone joint venture for 1.05 billion euros ($1.45 billion), as it seeks to catch up with smartphone and tablet makers Apple and Samsung.
The deal to buy out its Swedish partner gives Sony ownership of certain handset patents held by Ericsson and will enable it to integrate the joint venture's output with its own range of products and content.
"Its the beginning of something which I think is quite magical," said Sony's chairman and chief Executive Sir Howard Stringer, Reuters said.
"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."
Until now Sony's tablets, games and other consumer electronics devices have been kept separate from the phones sold and created by Sony Ericsson.
"Sony is looking to do the same as Apple and meet user's demands through linking various devices with similar interfaces and operating systems," said analyst Nobuo Kurahashi of Mizuho Investors' Securities in Tokyo.
"Since television sales are set to fall smartphones look to become more important products for Sony since their sales are rising globally and they will probably become the main device people use to connect to the Internet."
Smartphone sales have been surging since Apple launched its first iPhone in 2007 and despite a slowdown in the overall consumer electronics market the strong demand for smartphones is expected to continue.
The takeover of Sony Ericsson by the Japanese group had long been talked of, and a source with direct knowledge of the matter told Reuters this month that a deal was in the offing.
"Sony now has all the components to compete with Samsung and Apple. The big question now is ... can it execute ?," said Pete Cunningham of industry consultancy Canalys.
"Based on history I am skeptical but I would not say it cannot be done," he added.
Founded in 2001, Sony Ericsson last year took around 2 percent of the global cellphone market with sales of 6.3 billion euros and employs some 7,500 people. Initially it thrived with an array of camera and music phones but then lost out in the smartphone race.
"Sony had to make this deal as it had run out of options, but integration challenges could prove to be a major hurdle," said Ben Wood, head of research at London-based mobile consultancy CCS Insight.
"As a major consumer electronics player lack of mobile assets had become a liability for Sony, particularly when compared with Samsung, whose telecommunication business creates nearly half of its profits," he said.
Ericsson said the deal provides Sony with a broad intellectual property cross-licensing agreement covering all the Japanese company's products and services as well as ownership of "five essential patent families relating to wireless handset technology."
"The only value Ericsson added to the venture was patents," said Cunningham.
However, in comparison Nokia, the world's largest cellphone vendor by volume, controls some 10,000 patent families.
Shares in Ericsson, whose main strength lies in its wireless network equipment business, were up 5 percent at 70 crowns by 1024 GMT.