STMicro to dump stake in ST-Ericsson chipset vendor

STMicroelectronics said it will sell off its stake in ST-Ericsson, the struggling chipset maker that STMicro jointly owns with Ericsson (NASDAQ:ERIC). STMicro said that as a result of strategic changes it is making it will exit its stake in the venture after a transition period, which is expected to end during the third quarter of 2013.

For ST-Ericsson, the decision leaves the company in a state of limbo, though STMicro said it will continue to serve as ST-Ericsson's supply chain partner and will provide advanced process technology and application processor intellectual property.

In October, Ericsson and STMicro confirmed that they had hired an outside advisor, which reports have identified as the bank JP Morgan, to advise them on possible options for ST-Ericsson, including a sale. In the third quarter ST-Ericsson posted an adjusted operating loss of $148 million on revenue of $359 million.

According to Bloomberg, which cited estimates from Kepler Capital Markets analyst Sebastien Sztabowicz, ST-Ericsson's net loss will be $900 million this year and $550 million in 2013. The joint venture reported a net loss of $841 million in 2011.

Ericsson said it will continue to work together with STMicro to find "a suitable strategic solution" for the joint venture. "Ericsson continues to believe that the modem technology, which it originally contributed to the joint venture, has a strategic value for the wireless industry," Ericsson said in a separate statement. "For Ericsson, a key priority in this process is a successful market introduction of the new LTE modems that it is certain will be very competitive and needed in the market."

In April, ST-Ericsson said it would cut 1,700 jobs and transfer the development of its standalone applications processor business to STMicro. ST-Ericsson said at the time it would still focus on chipsets for smartphones and tablets--specifically the integration of baseband and applications processor platforms. The company sells an integrated chipset product called NovaThor.

ST-Ericsson's fortunes have been waning as sales of Nokia's (NYSE:NOK) legacy Symbian smartphones have declined; Nokia has long been the silicon vendor's largest customer. However, ST-Ericsson has said NovaThor will be used by Nokia for upcoming smartphones using Microsoft's (NASDAQ:MSFT) Windows Phone software. Those phones have yet to appear; however, ST-Ericsson said today that "a NovaThor single chip modem and application processor based on ST's advanced process technology has been sampled." 

For more:
- see this STMicro release
- see this ST-Ericsson release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article

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