Sony Ericsson used to make big strides in phone development - they introduced one of the first phones with a colour screen (the T68 & T68i), even going as far as to make one of the first MP3 attachments and camera attachment as well.
In the smartphone sector, there was always strong rivalry between UIQ phones such as the P800, P900, etc and the Communicator range but as @Red Bren pointed out, the P990i was starting to lose ground against its better functioning competitors.
I also recall the series of Palm based PDAs that Sony produced many, many years ago. Again, there were some really solid designs (my T37 lasted a very long) and they seemed very determined to bring out new ideas (including the first PDA with an OLED screen - released in Japan only).
If Sony can recapture these glory days and use this acquisition to bring greater diversity to the phone market (rather than just flat touchscreen slab, no buttons, kkthanxbai) then it could really rejunvinate their presence in the phone market. If, on the other hand, they are merely doing this for IP and patents, with a view to ditching Ericssons engineers, then what happened with HP & WebOS will seem like a rousing success story by comparison.