Ericsson to Take a $1.2 Billion Write Down, No Purchase of STM Micro Stake in ST Ericsson

“Earlier this week European Commissioner Neelie Kroes spoke in platitudes about how the EU would be putting more effort into kick-starting the region’s hardware industry — to create the ‘Airbus of chips.’ Her words seem particularly ironic (and possibly more empty) today, as the world’s largest telecoms company, Ericsson,admitted it would have to take a writedown of $1.2 billion (8 billion Swedish crowns) related to the decline of its European chip JV ST-Ericsson, as it tries to figure out what to do next with the loss-making business.

In a statement, Ericsson also said that it would not acquire the 50% of ST-Ericsson that it does not already own. “To acquire the full majority of ST-Ericsson is…not an option,” it said. That will, however, mean some $458 million more to keep propping up the company anyway in the next year. “Ericsson’s current best estimate is that the implementation of the strategic options at hand will require approximately SEK 3 b. of Ericsson funding, of which the majority in 2013,” it said.

Ericsson and STMicroelectronics first entered into their JV in 2009 with the aim of using their combined size to lead the market in wireless equipment chips. The aim was to be “fabless” — that is, designing the chips but outsourcing the making to other foundry companies — to beat down some capex and opex. But earlier this month, STMicro said that it would divest itself of its stake after ST-Ericsson failed to achieve break-even….”

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