Ericsson takes $1.2bn hit on ST-Ericsson

Swedish infrastructure vendor Ericsson has announced that it will incur a non-cash charge of approximately SEK8bn ($1.2bn) related to its 50 per cent stake in chip vendor ST-Ericsson. The firm also said that it has decided not to acquire a full majority stake in the joint venture.

Ericsson is incurring a $1.2bn charge related to its stake in JV ST-Ericsson

Ericsson said that the charge includes write down of assets to reflect the current best estimate of Ericsson’s share of the market value of the firm, as well as additional charges related to the available strategic options for the future of ST-Ericsson’s assets.

ST-Ericsson has been jointly owned by European STMicroelectronics but the firm announced earlier this month that it has taken the decision to exit the JV. It is currently in negotiations on exit options.

Ericsson said that it continues to believe that the modem technology, which it originally contributed to the JV, has a strategic value for the wireless industry. A key priority for the firm in this process is a successful market introduction of the new LTE modems which it still believes will be very competitive and needed in the market.

“Ericsson will continue to explore various strategic options for the future of ST-Ericsson assets,” the firm said in a statement. “To acquire the full majority of ST-Ericsson is, however, not an option. Ericsson’s current best estimate is that the implementation of the strategic options at hand will require approximately SEK3bn of Ericsson funding, of which the majority in 2013.”

One comment

  1. Avatar MP Singh 21/12/2012 @ 8:12 am

    The alliance is way too expensive for Ericsson considering the LTE modem as the expected dividend. It can be done much much cheaper from Ericsson’s other ecosystem partners.

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