LONDON – Didier Lamouche, the CEO appointed in December at fabless mobile chip joint venture ST-Ericsson, is set to announce a re-organization before the end of the month, which will ready the company for sale, according to a Reuters report that quoted unnamed sources.
ST-Ericsson is massively loss-making and has built up large debts with its parent companies over the three year period since its formation in February 2009. There is no breakeven point in sight as so-called legacy products, those created before the formation of ST-Ericsson are declining rapidly while the new chip designs and platforms have, in many cases, yet to reach volume in a rapidly changing mobile phone market. The drag of ST-Ericsson on STMicroelectronics' financial results has been commented on by financial analysts who have called for ST to address the situation.
Potential buyers for ST-Ericsson could include Advanced Micro Devices Inc., Intel Corp., Nvidia Corp. and Texas Instruments, the Reuters report said quoting sources. However, they expect a deal to be delayed for a year or two until ST-Ericsson shows signs of a turnaround.
The restructuring due to be unveiled by Lamouche is likely to include major layoffs and could include seeking a partner on application processors, the report said.
ST-Ericsson has lost $2 billion in three years as revenues from key customers Nokia and Sony Ericsson shrank by 70 percent, the report said.
Bad idea to rely on legacy products and not aggressively invest in innovation. It is a tough business and it is do or die. The "Swiss way" of "doing what we've always done before" is a recipe for disaster, and in this case it came quite quickly indeed.