Why is STMicroelectronics segregating and exposing the finances of its better performing 'More-than-Moore" and challenged 'Moore's Law" product groups?
A month or so back ST announced that ST would be divided into two product-oriented business segments that would each be financially sustainable. The first block comprises analog, power, sensors and automotive. The second is the remaining digital activities including embedded processing, microcontrollers and processors for digital consumer applications.
The announcement didn't come from ST's CEO Carlo Bozotti but from Georges Penalver who joined the company in September 2012 as chief strategy officer. And Penalver went further and added that in the interests of "transparency" ST would report financial results for each of the two segments, including revenues, operating income and free cash flow.
In effect, ST's is putting its better performing 'More-than-Moore' product groups in one segment and those that are challenged – the ones driven by Moore's Law – in another, and then it is going to expose and underline the quarterly economic viability of each by detailing the finances.
It seems crazy...unless Penalver is working towards a plan B. But what would that be?
ST's analog and sensors activities have been doing well while the digital portion of the business, but most particularly the mobile chip joint venture ST-Ericsson NV, has been struggling. And ST continues to engage in the paradox of whether it can afford to be involved in process technology development while being fab-lite. This drew criticism from some financial analysts at the most recent ST analysts' one-day conference held in London.
ST's rising star Benedetto Vigna has presided over the rise of ST's MEMS business from almost nothing in 2005 to a billion-dollar business in 2012. But ST-Ericsson, which ST will exit this year, has proved an insurmountable problem. In 2012 Bozotti said that he had the dream of seeing the two pillars of ST's business be successful and identified VLSI as the problem.
But how does lumping the VLSI-related products together and exposing their finances help?
Georges Penalver, chief strategy officer at STMicroelectronics.
@Peter: "But how does lumping the VLSI-related products together and exposing their finances help?"
The benefit is indirect. The market increasingly demands transparency. If I'm an ST investor, *I* certainly want that sort of breakdown. And if I'm ST senior management, that should be the way I'm looking at the numbers. I need to know where I'm doing well and where I'm lagging to make sensible decisions about what I ought to be doing.
It positions ST for future developments. I don't expect them to try to dispose of all of the Moore's Law related businesses in a lump. Who would buy them? I can see future investments, acquisitions, or divestitures in that segment, based on updated appreciations of the state of the market. Breaking out the financials provides clear grounding for decisions that might be made, because they'll be based on those numbers.
But who is doing the acquiring? and of what?
Do you mean that ST would try and sell the "Moore's Law" half of its business to a wannabe chip company that might take it as a way of bulking up?
Such a belated down-sizing would bring ST more in line with NXP and Infineon (More-than-Moore) which have already gone through this process.