Only half the story
The other key building blocks are wireless connectivity and power management, analog and mixed-signal. These are also non-critical and it would seem that more outsourcing deals may be on the cards.
However, if ST-Ericsson is to reach its targets, analysts reckon the company still needs to increase revenue run rate and gross margins to about $400 million per quarter and 40 percent, respectively. In its most recent financial results for 1Q12 the company made a net loss of $312 million on sales revenue of $290 million.
It would seem that what we have been told so far is less than half the story. Clearly there may be more outsourcing deals to come but the parents also look decidedly uncomfortable.
Ericsson, which recently took back the ST-Ericsson CTO into its own employ, has disentangled itself from its handset joint-venture with Sony and so looks decidedly less interested in ST-Ericsson. It may be a question of finding a buyer at almost any price. Sony itself might be a contender only it is suffering its own crisis of profitability.
And as outlined above it seems inconceivable that STMicroelectronics shareholders could think it a good deal to carry ST-Ericsson for the next two years.
Perhaps what we will see is the movement of certain technology development operations out of ST-Ericsson to create licensing opportunities, thereby allowing the remaining ModApp company to be sold off. But to have any value it has to continue to get design wins, must continue to lay off engineers and must continue to drive down cost.
Related links and articles:
ST-Ericsson passing processors to ST, cutting staff
Report: ST-Ericsson re-org is prep for sale
ST-Ericsson loses CTO
ST's Carlo Ferro appointed COO at ST-Ericsson
ST-Ericsson replaces CEO with ST's Lamouche
Why ST should sell ST-Ericsson to China
How long has ST-Ericsson got?