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Date: 19-03-13

ST-Ericsson to dissolve and the stake holders to split resources

Communication IC chip maker ST-Ericsson is going to be dissolved and its investors Ericsson and STMicroelectronics to split the resources.
Both ST and Ericsson have agreed to take these below main steps of action of resource splitting:
Ericsson will take on the design, development and sales of the LTE multimode thin modem products, including 2G, 3G and 4G multimode
ST will take on the existing ST-Ericsson products, other than LTE multimode thin modems, and related business as well as certain assembly and test facilities
Starting the close down of the remaining parts of ST-Ericsson

The formal transfer of the relevant parts of ST-Ericsson to the parent companies is expected to be completed during the third quarter of 2013, subject to regulatory approvals.

After the split up it is proposed that Ericsson will assume approximately 1,800 employees and contractors, with the largest concentrations in Sweden, Germany, India and China.

It is also proposed that ST will assume approximately 950 employees, primarily in France and in Italy, to support ongoing business and new products development within ST.

“In line with what we announced in December last year, we have now moved to the next step of our exit process and found a solution with Ericsson that fully aligns with our new strategy”, said Carlo Bozotti, President and CEO of ST. “The agreement made with Ericsson represents a major step forward in reaching our new financial model target and allows us to further strengthen the skillsets of our company, by welcoming in ST, at completion, additional strong competences to fuel growth in specific key product areas. Moreover, it protects and leverages the ongoing ST-Ericsson’s business, allowing us to reinforce our relationships with key customers, both of ST and of ST-Ericsson”.

ST stated in its release this agreement of splitting ST-Ericsson will further strengthen its capabilities in the areas of application processors, RF, analog and power as well as software and complex system integration. In addition, ST-Ericsson’s portfolio includes devices that are complementary to ST’s focus on the fastest growing segments of the wireless semiconductor market, such as system-optimized analog mixed signal and power management devices, high-quality, low-power audio and video enhancements and innovative energy harvesting solutions.

ST says this agreement is fully in line with its financial model target of an operating margin of 10 percent or more and with plans to reduce quarterly net operating expenses to an average quarterly rate in the range of $600 million to $650 million by the beginning of 2014.

Mr. Carlo Ferro is appointed as President and Chief Executive Officer of ST-Ericsson, effective April 1, 2013 to lead the work in securing both business continuity of ST-Ericsson and effective completion of the transition phase.

Hans Vestberg, President and CEO, Ericsson and Chairman of the Board of Directors, ST-Ericsson said: "I welcome Carlo Ferro as the new President and CEO of ST-Ericsson. Carlo has over twenty years of experience in the semiconductor industry and a strong track record in driving and managing complex transformation projects. He has been a contributor to the solid progress ST-Ericsson has made the past year in terms of strategy execution and significantly lowering the breakeven point."

"Ericsson continues to believe that the thin modems hold a strategic value to the wireless industry. With this move Ericsson will create a highly focused "thin modem only" operation - an area in which both parents have invested significant amounts to establish industry leading technology and Intellectual Property," said Hans Vestberg. "Initial customer contacts give support to the belief that our modems will meet the requirements of the manufacturers in the rapidly growing smartphone and tablet market."

Ericsson stated in its release "The thin modem technology developed within ST-Ericsson has evolved into a unique architecture for low power, highly integrated multimode multi-band modems covering GSM/GPRS/EDGE, TD-SCDMA, HSPA+, LTE (TDD/FDD), LTE-Advanced, the widest array of frequency bands and a feature set that includes Single RF Chip Carrier Aggregation, VoLTE and IMS."

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