STMicroelectronics, Ericsson abandon joint venture

Chipmaking partners STMicroelectronics NV and Ericsson AB said Monday, March 18, they would divide up their ST-Ericsson cellular chipmaking venture after failing to find a buyer.

Swedish cellphone equipment maker Ericsson will take on the bulk of the venture's chip development and sales activities, along with 1,800 employees, primarily in Sweden, Germany, India and China.

Meanwhile, ST will integrate 950 mostly French and Italian employees to help it with its own chipmaking business. That leaves 1,600 employees facing pink slips.

"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," STMicroelectronics said.

STMicroelectronics and Ericsson founded the venture in 2009 in hopes of keeping pace with the explosion in smartphones. But the company quickly fell behind when key customers Nokia Corp. and BlackBerry maker Research In Motion Ltd. lost market share to sector leaders Apple Inc. and Samsung Corp.

STMicroelectronics and Ericsson in December threw in the towel on the venture but had hoped to sell parts of the business to reduce the risks of layoffs and related costs.

The separation should be completed in the third quarter.

STMicro said it will have to write off between $350 million and $450 million in restructuring costs related to the move.

Ericsson said it had made 3.3 billion Swedish kronor ($511.9 million) in provisions to cover the integration. It said the former ST-Ericsson activities it's taking over -- thin cellular phone modems to put the phones online -- will have an operating loss of Skr500 million in the fourth quarter of 2012.

Shares of Geneva-based STMicro rose 5.3%, or €0.305, to €6.16 ($7.97), in afternoon Milan trading while Stockholm-based Ericsson slipped 1.8%, or Skr1.35, to Skr83.90.

The venture will also get a new boss in its final days. COO Carlo Ferro will replace outgoing CEO Didier Lamouche April 1. Lamouche resigned to take an as-yet unannounced position outside the company.

A number of high-profile cellphone companies teamed up in the face of broad competition only to see the ventures fail. Ericsson itself hung up on a handset cooperation with Sony Corp., selling its half to the Japanese electronics giant.

And Nokia and Germany's Siemens AG have sold off a former network equipment venture piecemeal after failing to find a buyer.