ST-Ericsson restructures, break-even recedes

LONDON – ST-Ericsson, the mobile phone chip joint venture between STMicroelectronics NV and Ericsson AB, has said it will implement cost savings to reduce annualized costs by about $120 million by the end of 2012. Up to 500 jobs are expected to be affected on a staff roster of about 6,700.

The company, which has been going through difficult financial times since its formation in February 2009, said the restructuring was necessary because of recent changes in the business environment and reduced demand for legacy products at certain customers.

ST-Ericsson has a strong dependence on Nokia, which itself has been suffering in recent quarters, and recent news out of China has suggested a much slower ramp for TD-SCDMA than previously expected. ST-Ericsson had pursued TD-SCDMA with China Mobile.

As recently as May, at an analysts day in New York, ST-Ericsson CEO Gilles Delfassy said achieving the publicly promised break-even target of Q2, 2012 is “not going to be easy.” That target has now been withdrawn. The cost savings plan includes a global workforce review that may affect up to 500 employees worldwide. Restructuring costs are estimated to be approximately $55 million, of which the majority is expected to be recorded during the second half of 2011.

"These actions while necessary to strengthen the financial position of the company, will not compromise the execution of our new products and delivery to our customers," said Delfassy, in a statement. "We continue to gain traction on our new product portfolio and remain steadfastly committed to leadership in the smartphone and tablet markets."


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