LONDON – Europe's largest chip company STMicroelectronics NV should persuade Ericsson AB that they sell off their mobile chip joint venture ST-Ericsson, but probably to some aspiring Chinese company. That is likely to produce the quickest and most profitable – or least loss-making – exit for the two parent companies from what has become a failed project.
ST-Ericsson is currently massively loss-making and has built up debts of $800 million with its parent companies over a three year period while losing nearly $2 billion. And things are slated to get worse before they get better.
According to a Reuters report Didier Lamouche, the CEO brought in to replace Gilles Delfassy late last year, is going to cut hard in a restructuring plan designed to take out cost – and that a trimmed down ST-Ericsson will start to look good for sale – eventually. However, the same report, quoting unnamed sources, said potential buyers in the western hemisphere, the likes of Intel and AMD, may want to wait one or two years to see the beneficial results of the cuts.
A spokesperson for ST-Ericsson said the company has no comment on the Reuters report but added that STMicroelectronics and Ericsson remain committed to the joint venture and that it is a fundamental part of ST's digital convergence strategy. It is interesting to note that ST-Ericsson is almost exactly three years old and that it may be Ericsson that wants to disengage from the joint venture and had expected ST to buy out its 50 percent.
I don't think ST-Ericsson or ST have that much more time. In a note in the most recent financial results ST-Ericsson said "Our shareholders will continue to support funding our transitional financial needs." This of course begs the question of "transition to what?" and "how long will that transition take?" The fact is that ST-Ericsson is a three-year old joint venture that has acted like a boat-anchor on the progress of STMicroelectronics.
It is true that ST-Ericsson wrapped up a lot of the previous problems of ST, specifically an overdependence on faltering Nokia as a customer, but pushing the problem into a joint-venture along with other European wireless chip business units belonging to NXP and Ericsson, was clearly not the solution.
We all live in a capitalistic society. It doesn't matter whether ST-E serves Europe or NOT. What matters is how to save a company and make it profitable.
Having said that, ST-E seems over-staffed and may need to become lean and mean org.
It's easy to be an arm-chair analyst. But really, if there is one thing you want from ST-E today, what is it?
LTE modem? (But its IPs share the same roots as that of Nokia. Now that Renesas bought Nokia's modem business, ironically, Renesas is the owner of that IPs)
Many of us discussed breaking up the ST-E business, but one could also argue that the strength of ST-E today lies in the fact that it has ALL the elements necessary to make the next smartphone chips.
The new ST-Ericsson LTE/HSPA/GSM modem (in e.g. Thor M7400 and NovaThor L8540) is based on ex-EMP (Ericsson Mobile Platforms) architecture and accelerator IP, and ex-NXP DSP. There is no connection to the Renesas (ex-Nokia) modem.
Unfortunately ( or fortunately ) W. European policymakers do not think the same way as Wall St. / City of London or the masses who have swallowed their Kool-aid of so - called "free - market".
Germany just put out a couple of 100 billons to bail out Greece.
Whats a few more billions if there are no alternative to STE for addressing Europe's hardware needs ? Sale of Volvo to China was quite enuff !
The British, who lost industrial competitivenes to France & Germany almost since the advent of the steam locomotive ( invented actually by the Frenchman Cugnot years before Trevithick ), have long abandoned hard work and innovation needed to promote social responsibility and instead have depended on colonial exploitation and unabashed manipulation of the english speaking masses of America to do their bidding.
It is British interference in US media & policies since Thatcher that have greased the skids for our suicidal policies in the name of "free trade".
This is the normal end of a company which has been managed by poor people (Philips Semi., ex. VLSI France,ex. SiLabs US, shark investor KKR, arrogant ST France, Ericsson) more interested to take over the power from the previous direction than to develop competitive and innovative solutions. This is as well very representative of the history of electronic in Europe. Let's see what will be the next steps of auto-destruction !! We shall certainly have very good suprises.
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