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December 20, 2012 9:22 am
Ericsson is to write down the full value of its stake in the lossmaking ST-Ericsson joint venture and take a SKr8bn in the fourth quarter as the Swedish telecoms equipment maker ruled out becoming the full owner of the mobile phone chipmaker.
STMicroelectronics, the Franco-Italian maker of semiconductors, announced earlier this month that it wanted to quit the joint venture, in which both companies hold 50 per cent.
Ericsson said on Wednesday that the SKr8bn non-cash charge reflected a writedown of the fair value of ST-Ericsson as well as including about SKr3bn in funding needed for “the available strategic options” for the joint venture.
ST-Ericsson has been hit by the woes at its biggest customer, handset maker Nokia, and the joint venture has accumulated losses of more than $2bn since being set up in 2009 after struggling to make headway with other smartphone manufacturers.
Ericsson, the world’s largest maker of telecoms equipment, has declined to comment on its plans for ST-Ericsson but for the first time on Wednesday it ruled out taking full ownership of the company.
Rumours swirled around Stockholm all autumn that the Swedish group was looking into the future of the unit, with bankers saying that there were few ready buyers for the assets. ST-Ericsson announced plans to cut a quarter of its then 6,500 jobs in April in what was its latest effort to break even.
Ericsson has repeatedly said that it sees value in the modem technology that it contributed to ST-Ericsson and said “a key priority” for the company would be the introduction of so-called LTE modems, a type of 4G.
It repeated that it continued to explore various strategic options and added that its best estimate for these was that they would need about SKr3bn of cash from Ericsson, mostly in 2013.
Ericsson’s shares fell by 2 per cent in early morning trade on Wednesday to SKr65.
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