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Ericsson, STMicroelectronics Wind Down Joint Venture

After several months of discussions, the management teams of Sweden-based Ericsson (NASDAQ: ERIC  ) and Switzerland's STMicroelectronics (NYSE: STM  ) have agreed on the dissolution of their mobile chip manufacturing joint venture, ST-Ericsson.

Several aspects of the joint venture will be assumed by either Ericsson or ST, the companies announced Monday, with the remaining parts of the ST-Ericsson partnership closed down.

Ericsson will retain design, development, and sales of the former venture's 2G, 3G, and 4G, LTE multimode thin modem products. STMicroelectronics will take over several testing and assembly facilities, in addition to multiple, existing ST-Ericsson products. The balance of the former joint venture's efforts are scheduled to be phased out by Q3 of 2013.

Ericsson has set aside SEK 3.3 billion ($512 million) to cover costs associated with the dissolution, and intends to report the former ST-Ericsson multimode thin modem unit as a separate business segment following the transition. Ericsson expects a loss by the unit of approximately SEK 0.5 billion ($78 million) in Q4, primarily due to R&D expenses.

STMicroelectronics will incur restructuring costs of approximately $350 million to $450 million during the transition period, less than previously expected.

The two companies also announced the appointment of Carlo Ferro, currently chief operating officer of ST-Ericsson, as president and CEO of ST-Ericsson to lead the unit during the change.


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