Analysts question Ericsson's commitment to ST-Ericsson

Ericsson's decision to sell its 50 per cent holding in the Sony Ericsson handset joint venture has triggered speculation that Ericsson will now want to exit the chipset joint venture, ST-Ericsson, that it established with STMicroelectronics in 2009.

Ericsson CEO Hans Vestberg rebuffed repeated questioning by financial analysts on the likelihood of exiting the JV during a teleconference to announce Ericsson's decision to sell its holding in the Sony Ericsson joint venture to Sony. While Vestberg admitted that ST-Ericsson was missing out on the growth of smartphones, with 50 per cent of revenues still being generated by chipset sales for feature phones, Vestberg said he is committed to the JV.

"The transformation [within ST-Ericsson] is underway, and the JV remains an important asset for the company," Vestberg said during the teleconference.

However, according to Dow Jones, industry analysts remain doubtful. Odon de Laporte, analyst at the brokerage firm Cheuvreux, said he would prefer that Ericsson divest, or decrease, its stake in the ST-Ericsson venture. "I think the most likely scenario is that Ericsson sells a large part of its stake in ST-Ericsson to private equity."

ST-Ericsson, which counts Nokia and Samsung as its customers today, announced a cost-cutting programme in June with the objective of saving $120 million, but also withdrew any commitment as to when the JV might become profitable. The company previously predicted breaking even in the second quarter of 2012.

STMicroelectronics CEO, Carlo Bozotti, told Bloomberg early last week that now is "not the right time" to consider disposing of the stake in ST-Ericsson.

For more:
- see this Dow Jones article
- see this Bloomberg article

Related Articles:
Nokia to use ST-Ericsson chips in Windows Phone devices
Report: Android most attractive for chipset vendors
Ericsson: JVs drag down results; equipment orders falter
Sony Ericsson slips into the red in Q2, points to W. Europe sales downturn

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