Report: ST-Ericsson may end up takeover target - Mobile World Live

Report: ST-Ericsson may end up takeover target

15 MAR 2012

Reuters reports that troubled mobile chip maker ST-Ericsson is being seen as a “strategic asset” by potential buyers – but that suitors are likely to look for signs of a turnaround before making a bid.

It was suggested that companies such as AMD, Nvidia, Intel and TI see the value in ST-Ericsson, as a tool to rival Qualcomm in the mobile space. However, until there are signs that it is back on the path to growth, these may not turn into bids.

Last year, Didier Lamouche, the COO of STMicroelectronics, was appointed as ST-Ericsson CEO. He is expected to announce a restructuring plan imminently, which is likely to see heavy cost cutting.

While ST-Ericsson’s current parents, STMicro and Ericsson, have said that they remain committed to the venture, it was noted that there will come a “tipping point” where their support for the loss-making business wanes.

In 2011, ST-Ericsson reported a net loss of US$841 million, compared with US$591 million in the prior year, on revenue of US$1.65 billion, down from US$2.29 billion.

The company noted it is expecting a “very significant” sequential decline in sales in the first quarter of 2012, due to higher inventory at some customers, weakening legacy product sales, and short-term issues with one of its largest partners – believed to be Nokia.

As a supplier for Nokia’s Symbian OS smartphones, ST-Ericsson was in a strong position while this platform was still dominant.
While it has an agreement in place with Nokia for future Windows Phone devices, the Finnish vendor is currently using Qualcomm chipsets in its products for this platform.

Reuters noted that there are other challenges for a potential buyer – including the close relationship it has with its current owners. Its future roadmap is said to lean heavily on ST-Micro technology, while Ericsson owns “most” of the venture’s patents.

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