Report: ST-Ericsson faces uncertain future as parents fail to find buyer
Ericsson and STMicroelectronics have failed to attract offers for their loss-making semiconductor joint venture after a three-month search for buyers, according to a Bloomberg report, sparking renewed speculation that the venture may be coming to an end soon.
The report, citing unnamed sources familiar with the matter, said Samsung Electronics was approached but declined to make an offer. Representatives from Ericsson, STMicroelectronics and Samsung declined to comment, according to Bloomberg. Analysts had previously suggested Intel and Broadcom could be likely purchasers but they never came forward, according to Reuters.
The joint owners will now consider whether to close down the ST-Ericsson business, the report said. Ericsson has said it will explore "various strategic options" for ST-Ericsson's assets. Ericsson took a €926 million charge in the fourth quarter related to ST-Ericsson. STMicroelectronics said in December it will sell off its stake in ST-Ericsson, a transaction it expects to complete during the third quarter of 2013.
While no final decision has been made over ending the JV, in the event of a closure, Ericsson could bring research and development back to a site in Lund, Sweden, and STMicroelectronics could integrate a site in Grenoble, France.
ST-Ericsson announced earlier this week that CEO Didier Lamouche, its third chief executive officer in as many years, will leave the company at the end of this month to pursue other opportunities. ST-Ericsson has not named a successor for Lamouche, who was COO at STMicroelectronics prior to joining ST-Ericsson.
Commenting on the lack of a buyer for the JV, Morgan Stanley analyst Francois Meunier told Bloomberg that "this could make ongoing operating losses at ST-Ericsson more of a drag than the market anticipates." An exit in the third quarter "seems ambitious" and may cost more than the $500 million STMicroelectronics budgeted for it, Meunier said.
Ending the JV will be politically sensitive given the job losses that might result. The company previously announced plans that would have seen 1,700 ST-Ericsson workers being cut, with others being transferred to product development at STMicroelectronics. The company also said last year that it would look to reduce some of its 44 R&D sites worldwide, among which Lund and Grenoble are the biggest.
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