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ST exit strategy a little too late?

Posted: 06 Feb 2013 ?? ?Print Version ?Bookmark and Share

Keywords:impairment of goodwill? exit strategy? ST-Ericsson? MEMS? microcontrollers?

Europe's largest and broadest chip company STMicroelectronics NV continues to bear the burden of its wireless joint venture with Ericsson. The chip company recently announced that it plans to exit the joint venture by 3Q13.

However, that is only little comfort to shareholders today. ST made a net loss of $428 million, mainly due to a $544 million charge for the impairment of goodwill and other intangible assets at ST-Ericsson. ST has also excused its subsidiary of the need to pay back just over $750 million of debt built up over the last three years of losses.

ST announced fourth quarter net revenues of $2.16 billion roughly flat with 3Q12 and marginally down from $2.19 billion in 4Q11.

And ST expects 1Q13 to be a poor quarter with a sequential decrease of about 7 per cent, partly on the forecast of poor sales at ST-Ericsson in 1Q13.

On top of these burdens ST stated that it now expects the exit of ST-Ericsson to cost in between $300 million and $500 million over the period to whenever the exit is achieved.

Carlo Bozotti, CEO of ST, said that semiconductor conditions are expected to improve in 2013, driven by a more favourable economic environment. "In particular, we expect imaging, microcontrollers, analogue and MEMS to be the highest contributors to our revenue performance," Bozotti said in a statement.

For the full year 2012 ST made a net loss of $1.16 billion on sales of $8.49 billion, which compares to a net profit of $650 million on sales of $9.73 billion in 2011.

- Peter Clarke
??EE Times

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