An Acquisition in the time of trouble: Sony acquires Ericsson with cash

The global market makes the international trade available, and at the same time, it raises a requirement for the currency exchange. And the currency movement could influence the return rate in their business. When the domestic currency rate rises up, and the trade currency keeps still or drops down, so the actual returns would be condensed down. Moreover, the reduced trade currency could decrease the value of acquisition. Besides, except the US dollar, the international currency, some special trade requires to trade in the special currency. This special currency changes the environment of their business.

On 18^th February, Sony Corp. declared that they paid 1.05 billion euros to Ericsson to acquire Ericsson’s stake in the Sony & Ericsson Mobile Communication AB which was founded in 2001 in joint venture form by the two company. Since then, Sony obtained the whole company's conduction and renamed as Sony Mobile Communications. However, the trade form, Euro, performed not very stable by the influence of European Debt Crisis. This acquisition could be treated as a risk trade. The company would reduce their value by the drop of Euro in the future. So why they make deal in this time of trouble? Do other reasons to support their decision?

I have researched on Japanese Yan currency trend in the three month, and it keeps rising in the past. This influence reduced their sales returns from Europe. At the same time, as the Sony & Ericsson was founded in London, they have to transfer their sales back to Yan, and use that to purchase the inventories in Japan, which makes more trouble in their operation. Thus, this purchase could be as an action to reduce the effects from Japanese Yan jumping. Apart from that, another reason is the strategic requirement. According to Mr. Kazuo Hirai, the vice-CEO of Sony, mentioned that Ericsson’s android focus did not provide the competition advantages to their business in the competition with iphone, so Sony wants to consolidate their capability on game with their mobile phone business. This acquisition would help to make their strategy realized. The company believed this consolidation could contribute greatly to their business and it could cover their risk and lost on the currency trade.

In my opinion, I think the currency could be a very important factor taken in account. However, like Sony, their action made great sense to their future, and this could be a key step to the business, at that time, the currency could be trade as a special expense to consider. To trade in the currency crisis, the decision could not only be narrowed into currency profit but also business horizon.