Ericsson (NASDAQ:ERIC) and STMicroelectronics agreed to shut down their unprofitable ST-Ericsson chipset joint venture and split up its assets, a move that will lead to a net loss of 1,600 jobs.
The announcement comes less than a week after a report that the parent companies tried and failed to find a buyer for the joint venture. That report, from Bloomberg, had indicated that shutting down the company was an option the parents were considering. ST-Ericsson said it is pursuing "external options" for the future of its connectivity business, which employs around 200 employees worldwide.
Under the split, which is expected to be completed during the third quarter of this year, Ericsson will take on the design, development and sales of the joint venture's LTE modem products, including 2G, 3G and 4G multimode modems, and will hire around 1,800 workers. STMicro will take on existing ST-Ericsson products other than LTE modems, along with related businesses and certain assembly and test facilities, and will hire 950 workers.
Carlo Ferro, currently ST-Ericsson's COO, was named CEO to help manage the winding down of the company. He will take over April 1 from Didier Lamouche, who said earlier this month he would leave the company.
"In 2009 the situation was different, we started with a great base of European customers," STMicro CEO Carlo Bozotti said on a conference call, according to Bloomberg. "Unfortunately this customer base has changed." ST-Ericsson struggled to keep up with the likes of Qualcomm (NASDAQ:QCOM), Nvidia and others in high-powered smartphone chips as its business shrank in part due to declining sales of Nokia's (NYSE:NOK) legacy Symbian smartphones.
ST-Ericsson has racked up $2.7 billion in net losses since 2009.
Ericsson said the standalone modem business with probably report an operating loss of $77 million in the fourth quarter of 2013. Ericsson took a $1.2 billion charge in the fourth quarter of 2012 related to ST-Ericsson.
"We want to be top three in modems," Ericsson CEO Officer Hans Vestberg told Bloomberg. "This is our ambition and I think we have the right capacity, competencies, slimmed- down organization and product for it."
For more:
- see this Ericsson release
- see this ST-Ericsson release
- see this Bloomberg article
- see this Reuters article
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