ST, Ericsson make break up plans

Struggling chip maker ST-Ericsson is to be shut down and dismantled, parent companies STMicroelectronics and Ericsson said Monday.

After what is described as “months of intensive work,” the parent companies have agreed to split up the JV, with Ericsson taking on the design, development and sales of the LTE multimode thin modem products, including 2G, 3G and 4G multimode; while ST takes on the existing ST-Ericsson products, other than LTE multimode thin modems, and related business as well as certain assembly and test facilities.

After the split it is proposed that Ericsson will assume approximately 1,800 employees and contractors, with the largest concentrations in Sweden, Germany, India and China. ST will assume approximately 950 employees, primarily in France and in Italy, to support ongoing business and new products development within ST.

In addition, ST-Ericsson is pursuing external options for the future of the connectivity business, which employs around 200 employees worldwide.

In connection with the transfer of the majority of its workforce to the parent companies, ST-Ericsson will carry out restructuring of its current operations which could impact some 1,600 employees worldwide, of which 500-700 are in Europe, including 400 to 600 positions in Sweden and 50 to 80 positions in Germany.

To oversee the process, Carlo Ferro has been appointed president and Chief Executive Officer of ST-Ericsson, effective April 1. Ferro is currently Chief Operating Officer of ST-Ericsson and succeeds Didier Lamouche.

Ericsson reiterated that it made provisions of SEK3.3bn in 2012 to cover costs related to the implementation of the strategic option and once the multimode thin modem business has been fully integrated into Ericsson in Q413 the operation will be reported as a standalone segment. Current estimates suggest that it will generate operating losses of approximately SEK500m in Q413, primarily related to R&D expenses.

The dismantling is expected to be completed during the third quarter of 2013, subject to regulatory approvals.

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