Ericsson chooses to step away from ST-Ericsson joint venture

Swedish telecommunications equipment maker, Ericsson, will take 8bn kronor ($1.2bn) charge in Q4 on its stake in ST-Ericsson joint venture

Swedish telecommunications equipment maker, Ericsson, will take an 8bn Swedish kronor (SEK) ($1.2bn) charge in the fourth quarter (Q4) on its stake in the ST-Ericsson joint venture.

STMicroelectronics announced earlier this month that it was leaving the venture, and Ericsson's recent move suggests that it will not be acquiring full ownership of ST-Ericsson.  

ST-Ericsson, which creates mobile phone chips, was created from a joint venture between Ericsson and STMicroelectronics. The company’s main customer, Nokia, has found it difficult to compete in the mobile industry against Apple and Android handsets, and this has had a knock-on effect for the struggling ST-Ericsson.

“Ericsson is concentrating much more of its efforts on the back-end of its infrastructure, rather than the device-end,” said Rob Bamforth, principal analyst, at Quocirca. 

“For a little while, Ericsson had gone back to its core strength, which is the cell tower-end of its infrastructure. So maybe ST-Ericsson is a venture too far – like the Sony Ericsson handset venture – which essentially hadn’t worked for them.

“The timing of this seems a bit odd," Rob Bamforth added. 

“It is the end of a quarter and often these decisions happen just before end of financial periods, but it is particularly harsh when it happens at Christmas with the impact on individuals.”

According to the Wall Street Journal, Ericsson currently has 4.5bn kronor worth of loans in regards to ST-Ericsson. The 8bn SEK charge covers an estimate of its share in the venture, as well as any "additional charges related to the available strategic options for the future of the ST-Ericsson assets."

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