LONDON Ė STMicroelectronics NV and Ericsson AB have agreed to break up their 50:50 mobile phone chip joint venture. The two companies had been looking for a "strategic solution" for the joint venture for several months.
Ericsson (Stockholm) will take back the LTE 2G-through-4G multimode modem technology while ST (Geneva) will take control of the existing ST-Ericsson products excluding the LTE multimode thin modem ICs and certain assembly and test operations.
The two companies have agreed to try and sell off the connectivity business separately, which employs approximately 200 people, and close down the remaining parts of ST-Ericsson.
As a result it is expected that Ericsson will assume responsibility for approximately 1,800 employees and contractors mainly in Sweden, Germany, India and China while ST is set to takeover about 950 employees, primarily in France and in Italy.
ST-Ericsson employs about 5,000 staff according to its website with the implication that up to half that number could be losing their jobs. ST-Ericsson said it would carry out a restructuring of its current operations which could impact some 1,600 employees worldwide of which between 500 and 700 are in Europe.
The break-up is due to be completed before the end of the third quarter of 2013, a target date for achieving a resolution previously set by ST. ST said it expects to incur cash costs, including the covering of ST-Ericssonís ongoing operations during the transition period and its restructuring costs, in the range of approximately $350 million to $450 million, slightly less than the previously provisioned $500 million the end of January 2013. As previously communicated, Ericsson has made provisions of 3.3 billion Swedish krona (about $500 million) to cover costs related to the implementation of the strategic option.
It was also announced that Carlo Ferro has been appointed president and CEO of ST-Ericsson, effective April 1, 2013, to succeed Didier Lamouche who, recently announced he was standing down to pursue other opportunities. Ferro is currently chief operating officer of ST-Ericsson.
ST said that the transfer of competencies from ST-Ericsson would strengthen its capabilities in application processors, RF, analog and power and help it address the fast-growing wireless semiconductor market.
Carlo Bozotti, CEO of ST, said the move would protect ST-Ericsson's business and reinforce relationships with key customers of both ST and ST-Ericsson.
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