ST-Ericsson set for major overhaul as sell-off rumours increase

ST-Ericsson will undergo a significant restructuring within the next two weeks as speculation increases that its new CEO is positioning the ailing company for a potential sale, according to a Reuters article.

While the joint owners of ST-Ericsso--France's STMicroelectronics and Sweden's Ericsson--have not indicated any interest in offers, and have publicly backed the silicon maker, industry chatter indicates that the two parents consider ST-Ericsson as a "strategic asset" for prospective buyers, according to the Reuters article, which cited unnamed sources.

ST-Ericsson CEO Didier Lamouche, a restructuring expert hired in late November, is set to unveil a revamp of the company later this month that seems likely to include factory closures around the world and major headcount reductions to cut costs, according to Reuters.

ST-Ericsson's parents, STMicroelectronics and Ericsson (NASDAQ:ERIC), declined to comment, as did ST-Ericsson, according to Reuters.  Ericsson CEO Hans Vestberg said in January that the company remains committed to ST-Ericsson despite having recently shed its investment in its handset joint venture with Sony.

It is possible that Lamouche's plans could also include seeking a partner for application processors which are at the heart of every smartphone. Qualcomm, ST-Ericsson's major competitor, presently holds around 50 per cent of the applications processor market.

Names mentioned as possible bidders for ST-Ericsson include AMD, Nvidia, Intel and Texas Instruments. However, these companies will likely want to see the results of Lamouche's restructuring which could mean a wait of several years. This has raised the question of the owners looking to a Chinese semiconductor firm wanting to enter the mobile sector by acquiring an existing major supplier.

Last week, the head of STMicroelectronics US, Bob Krysiak, said at an investor conference that the downturn in ST-Ericsson's fortunes had been caused by the collapse of Nokia's Symbian business and its failure to meet new product schedules.

When asked what might happen if STMicroelectronics was unhappy with the restructuring plan, Krysiak indicated that there were some limits to management's patience. "We're not going to stay there forever," he said, according to a Seeking Alpha transcript.

For more:
- see this Reuters article
- see this Seeking Alpha article

Related Articles:
Ericsson CEO: We're going to stick with ST-Ericsson joint venture
Ericsson shocks market with 66% Q4 profit slide
Analysts question Ericsson's commitment to ST-Ericsson
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

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