Ericsson's JV ST-Ericsson Announces New Strategic Direction
(firmenpresse) - STOCKHOLM, SWEDEN -- (Marketwire) -- 04/23/12 --
* Focused R&D effort and partnership with STMicroelectronics in the
development of future application processors
* Restructuring program to lower break even point and accelerate
time-to-Market
* Ericsson committed to the 50/50 joint venture and its new strategic
direction
ST-Ericsson - the 50/50 joint venture owned by Ericsson (NASDAQ: ERIC) and
STMicroelectronics (NYSE: STM) - announced today the guidelines of its new
strategic direction. Within the company's new strategic direction it has
signed
an agreement to transfer its stand-alone application processor R&D
activities to
STMicroelectronics, and to take additional measures to accelerate
time-to-market
and lower the breakeven point.
"ST-Ericsson's strategic shift is a key step in ensuring that the company
can
reach sustainable profitability and cash generation. With the focus on
ModAps
for smartphones and tablets it will allow device manufacturers to rapidly
bring
best-of-breed devices to the market," said Hans Vestberg, president and CEO
of
Ericsson and Chairman of ST-Ericsson Board of Directors.
The new strategic direction announced by ST-Ericsson today builds on four
main
pillars:
1. Strategic Focus
The Company re-affirms its vision to be a leader in smartphone and tablet
platforms and unveiled a new strategy based on repositioning the whole
business
model. The new strategic direction leverages on ST-Ericsson's unique
capability
to deliver complete system solutions for smartphones and tablets;
competitive
integrated modem plus application processor solutions (ModAp) will be the
key
differentiating offering through a combined approach of development and
alliances.
The key building blocks of the complete system solution - application
processors, modems, connectivity as well as power, RF, analog and mixed
signal -
will be developed either directly or through partnerships and alliances to
limit
and optimize the R&D effort, while enabling highly compelling solutions for
its
customers to bring innovative devices to the market in a timely manner. The
Company will continue to develop modem IP, a key competitive enabler, sell
thin
modems and possibly license modem IP to third parties.
2. Partnership already signed: application processor
As a first step of this new strategy, ST-Ericsson has announced that it
will
partner with STMicroelectronics in the development of future application
processors. The combination of the ST-Ericsson and STMicroelectronics teams
will
create a world-class organization, having the appropriate size, skills and
strength to win in the growing multi-segment application processor market.
Under the terms of the agreement, ST-Ericsson, at closing date[1], will
transfer
its application processor R&D activity and employees to STMicroelectronics
and
will then integrate the application processor in ModAp platforms for
smartphones
and tablets under a license agreement from ST. In addition to this, the two
companies have entered into a commercial agreement to jointly promote and
offer
stand-alone processors and thin modems, respectively, to a broader range of
customers and applications.
The entire ST-Ericsson application processor R&D team will continue, under
a
transitional cost sharing model, the development of the current product
generation, ensuring full continuity of ST-Ericsson's product roadmap and
full
service to customers.
3. Accelerate time-to-market
In addition to this strategy change, the company will focus on improving
R&D
execution and accelerating time-to-market, while reducing the overall
operating
expenses. The activities will be consolidated into a significantly smaller
number of sites, which will be specialized by technology as "centers of
excellence." The larger ones will also integrate a wider portion of the
smartphone platform value chain, with a view to optimizing time-to-market
and
delivery efficiency. This comprehensive site transformation is aimed at
enhancing the effectiveness of operations and will significantly reduce the
number of sites. Additionally the Company aims at reducing its SG&A
expenses by
about 25 percent versus 2011 by streamlining the general and administrative
activities and substantially reducing positions within the top paid members
of
the management.
4. Lower the breakeven point
As a result of all the above initiatives, the Company - subject to
negotiations
with work councils and employee representatives as required - foresees a
global
workforce reduction of 1,700 employees worldwide, including the employees
that
would be transferred to ST as part of the partnership announced today.
Annual savings of about $320 million are expected from the new and from the
on-going restructuring plans, upon completion by the end of 2013. Total
restructuring costs are estimated to be approximately $130 to 150 million
through completion. Specific impact on country or site level related to the
plan
will depend on local negotiations based on applicable legislation.
Conference call
An analyst conference call, hosted by Didier Lamouche, president and CEO of
ST-Ericsson, will be held on April 23, 2012 at 18:00pm Central European
Time (CET).
Call-in numbers as well as supporting slides, will be available at
.
About ST-Ericsson's products
An application processor is a complex system-on-a-chip (SoC) for
smartphones and
tablets that supports applications and software running on mobile devices.
In a
similar way that a traditional general purpose microprocessor in a
computer
performs all processing and control functions, an application processor
powers
complex mobile devices efficiently processing functions such as user
interface,
graphics processing, phone calls, audio and video recording and playback
and web
browsing.
ST-Ericsson is a 50/50 joint venture between STMicroelectronics and
Ericsson,
established in February, 2009. ST-Ericsson's result is accounted for in
accordance with the equity method.
About ST-Ericsson
ST-Ericsson is a world leader in developing and delivering a complete
portfolio
of innovative mobile platforms and cutting-edge wireless semiconductor
solutions
across the broad spectrum of mobile technologies. The company is a leading
supplier to the top handset manufacturers and generated sales of $1.7
billion in
2011. ST-Ericsson was established as a 50/50 joint venture by
STMicroelectronics
(NYSE: STM) and Ericsson (NASDAQ: ERIC) in February 2009, with headquarters
in
Geneva, Switzerland.
NOTES TO EDITORS
Our multimedia content is available at the broadcast room:
Ericsson is the world's leading provider of communications technology and
services. We are enabling the Networked Society with efficient real-time
solutions that allow us all to study, work and live our lives more freely,
in
sustainable societies around the world.
Our offering comprises services, software and infrastructure within
Information
and Communications Technology for telecom operators and other industries.
Today
more than 40 percent of the world's mobile traffic goes through Ericsson
networks and we support customers' networks servicing more than 2 billion
subscribers.
We operate in 180 countries and employ more than 100,000 people. Founded in
1876, Ericsson is headquartered in Stockholm, Sweden. In 2011 the company
had
revenues of SEK 226,9 billion (USD 35.0 billion). Ericsson is listed on
NASDAQ
OMX, Stockholm and NASDAQ, New York stock exchanges.
Ericsson discloses the information provided herein pursuant to the
Securities
Markets Act and/or the Financial Instruments Trading Act. The information
was
submitted for publication on April 23 at 16.10pm CET.
[1] completion of labor law related procedures and merger control
approvals, if
applicable, are the sole conditions precedent to closing of the agreement
Press release in PDF:
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Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Ericsson via Thomson Reuters ONE
[HUG#1605044]
FOR FURTHER INFORMATION, PLEASE CONTACT
ST-Ericsson - Media Relations
Phone: +41 22 929 2929
Email:
ST-Ericsson - Investor Relations,
Fabrizio Rossini
Phone: +41 22 929 6973
Email:
Ericsson Corporate Public & Media Relations
Phone: +46 10 719 69 92
E-mail:
Ericsson Investor Relations
Telefon: +46 10 719 00 00
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Datum: 23.04.2012 - 08:32 Uhr
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