Ericsson (NASDAQ:ERIC, news, filings) and STMicroelectronics (NYSE:STM) today announced an agreement on the way forward for the joint venture (JV) ST-Ericsson. As communicated by the parent companies in December 2012, both have been working together toward a strategic solution for the JV. After months of intensive joint work, the parent companies have selected the strategic option which maximizes their respective future prospects and growth plans.
The main steps agreed upon to split up the JV are the following:
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Ericsson will take on the design, development and sales of the LTE multimode thin modem products, including 2G, 3G and 4G multimode
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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
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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.
Today, it is also announced that Carlo Ferro is appointed President and Chief Executive Officer of ST-Ericsson, effective April 1, 2013. Ferro is currently Chief Operating Officer of ST-Ericsson and succeeds Didier Lamouche who, as previously announced, will pursue opportunities outside the company. Ferro will 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.”
As previously communicated, Ericsson has made provisions of SEK -3.3 b. in 2012 which will cover costs related to the implementation of the strategic option. Once the multimode thin modem business has been fully integrated into Ericsson in Q4 the operation will be reported as a standalone segment. Our current best estimate is that it will generate operating losses of approximately SEK 0.5 b. in Q4, 2013, primarily related to R&D expenses.
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.
An LTE/HSPA+/3G/2G modem based on this evolved architecture was recently demonstrated at Mobile World Congress in Barcelona and has received its first global operator certification.
CONFERENCE CALL FOR ANALYSTS, INVESTORS AND MEDIA
The conference call for financial analysts, investors and media will begin at 14:00 CET (13:00 UK time, 09:00 Eastern Daylight Time in the US, and 22:00 local time in Japan). CFO Jan Frykhammar and Chief Strategist Douglas Gilstrap, will comment on the announcement and take questions.
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NOTES TO EDITORS
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Ericsson is a world-leading provider of communications technology and services. We are enabling the Networked Society with efficient real-time solutions that allow us all to study, work and live our lives more freely, in sustainable societies around the world.
Our offering comprises services, software and infrastructure within Information and Communications Technology for telecom operators and other industries. Today 40 percent of the world’s mobile traffic goes through Ericsson networks and we support customers’ networks servicing more than 2.5 billion subscriptions.
We are more than 110,000 people working with customers in more than 180 countries. Founded in 1876, Ericsson is headquartered in Stockholm, Sweden. In 2012 the company’s net sales were SEK 227.8 billion (USD 33.8 billion). Ericsson is listed on NASDAQ OMX, Stockholm and NASDAQ, New York stock exchanges.
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