It's difficult finding anyone today who doesn't believe chip giant STMicroelectronics NV urgently needs a new growth strategy. And that pertains to people both within and outside the European semiconductor giant.
Generally, company executives and industry analysts believe the Swiss-based semiconductor company must channel a new course for its future. The disagreement comes in deciding whether ST should drastically reorganize its operations and product portfolio—which means jettisoning burdensome and non-core offerings—or simply fine tune its current strategy, stay the course and gradually build up a formidable position in its market-leading products.
ST has said it will early in December unveil its plans and attempt to put to rest finally speculations about its future. Those speculations have centered on alleged plans by ST to
split itself into two business units, a move the company has rejected.
No one in the investment community would be surprised if ST decided to go ahead with a split or dump ST-Ericsson, the communications IC joint venture with Ericsson that's considered a dead weight around the two companies' corporate necks. ST's management shouldn't be shocked, either, if investors react negatively to a plan that doesn't surgically pinpoint and addresses the company's perceived problems. In other words, ST must come up with a reorganization plan that confirms executives realize the company cannot continue with business as usual.
A breakup of ST into two companies—one focused on analog and the other on digital ICs—makes little sense in my opinion. The worn dialogue pitting analog and digital companies against each other in terms of return on investments is irrelevant in today's world. In fact, it is a short-sighted take on what semiconductor companies must do nowadays to not merely survive but be competitive. The analog and digital worlds co-exist and will continue to do so. For the biggest chip companies, analog and digital offerings are complementary and in fact may be critical to winning business at major OEMs.
ST's most important strengths lie in the extensive product offerings and the wide range of markets served, including automotive, computing, communications, control systems, consumer and industrial automation. This has allowed the company to offset weakness in any particular market sector with strength in other segments. And, while its growth has been less than impressive lately—annual sales will decline for the second consecutive year in 2012—the company's performance could have been worse had it not been able to rely on faster-growing product lines to counter the impacts of its weak segments.
If the greedy Wall Street analysts and the fat cats from the big banks are willing to follow your suggestion of "try, try again" to give ST time and money, I'll buy you a ticket from anywhere in the world to Switzerland and pay you for a 5-day decent hotel accommodation.
ST-E has much better fundamental core strength than the laughing stock like Renesas Mobile. For this to survive and to prove its might, persistent investment are needed. STM doesn't seem to have the cash. The investment community in Europe has unfortunately been following their greedy counterparts from Wall Streets and is unlikely to put up with the investment. So, the best course is to find a good home for the STE. STM should look east for the takers - Korea or China!
ST-Ericsson cannot survive against Qualcomm (high end) and Mediatek (low end). They should stop but splitting analog and digital units will not help. Their advantages in the sensor area will decrease as many other suppliers are active in this market.
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