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Ericsson writes down ST-Ericsson investment

Ericsson says it will write down the value of its investment in ST-Ericsson by $1.2 billion, and that its third quarter earnings will be off by the same amount due to the charge. The news comes less than two weeks after Ericsson’s partner in the chipmaking venture announced plans to bail out. STMicroelectronics is exiting the joint venture as part of a reorganization.

The dissolution of the joint venture led to speculation that Ericsson would sell the 50% it does not own, but Ericsson says it has no plans to do that. So the future of ST-Ericsson is up in the air. Ericsson could try to sell it, either as a unit or in pieces. The venture’s applications processor unit is already being absorbed by STMicroelectronics.

ST-Ericsson is currently focused on designing solutions that integrate cellular modems with application processors. These are in high demand by manufacturers of entry-level and mid-range mobile devices.

Geography may be one of ST-Ericsson’s liabilities. Like Ericsson the company is based in Stockholm, Sweden, while a lot of the world’s semiconductor design talent is in North America and Asia, as are a lot of potential customers. ST-Ericsson initially counted Finland’s Nokia as one of its biggest customers. But ST-Ericsson supplied chipsets for smartphones running the Symbian operating system, which Nokia has abandoned in favor of Windows.

ST-Ericsson is not a major supplier for Apple or Samsung, the two giants of the smartphone industry. Samsung has its own semiconductor business, and Apple has been named a possible buyer of ST-Ericsson.

ABOUT AUTHOR

Martha DeGrasse
Martha DeGrassehttp://www.nbreports.com
Martha DeGrasse is the publisher of Network Builder Reports (nbreports.com). At RCR, Martha authored more than 20 in-depth feature reports and more than 2,400 news articles. She also created the Mobile Minute and the 5 Things to Know Today series. Prior to joining RCR Wireless News, Martha produced business and technology news for CNN and Dow Jones in New York and managed the online editorial group at Hoover’s Online before taking a number of years off to be at home when her children were young. Martha is the board president of Austin's Trinity Center and is a member of the Women's Wireless Leadership Forum.