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October 10, 2012

JP Morgan Looks at Strategic Options for ST-Ericsson

An external advisor has been retained by Ericsson and STMicroelectronics (News - Alert) for their ST-Ericsson joint venture.

The advisor, U.S. investment bank JP Morgan, is helping develop a strategy for the joint venture. It appears it would be difficult to sell the venture due to its losses.

ST-Ericsson saw a loss of $235 million in Q2. The operating loss is largely blamed on lower demand for phones from Nokia (News - Alert) and Sony Ericsson. There is also a shift to supplying chips for smartphones rather than older feature phones.

Also, the company during 2011 saw a loss of $841 million on sales of $1.65 billion. In addition, the company lost some $2 billion during the three years it was operating.

"The two parent companies, together with ST-Ericsson (News - Alert), are currently working with an external advisor in order to ensure the best possible future for ST-Ericsson," a statement from the company said.

ST-Ericsson is trying to cut costs so it can break even. Various options are being looked at for the joint venture, including finding a new partner or selling some of the company’s assets.

Les Echos, a daily financial newspaper based in France, speculated the joint venture could be sold off in parts related to specific technologies. And portions of the company could be assigned to the parent companies.

"The possibilities for Ericsson are limited except to hold on to its share and try and do the turnaround themselves," Mirko Maier, an analyst at LBBW, said.

In other recent company news, Cybercom, an IT consulting company, and ST-Ericsson agreed to transfer resources of the ST-Ericsson research and development center in Linköping, Sweden to Cybercom, according to a report carried on TMCnet. Cybercom will develop testing tool software for ST-Ericsson.

Edited by Brooke Neuman

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