ST-Ericsson refocuses business, announces layoffs

The company says that it will be forced to reduce its global workforce by 1,700 employees, but some of those will be transferred to ST as part of its broader plan.

ST-Ericsson, a chip maker that got caught up with the wrong crowd, has announced sweeping changes in an effort to stay relevant in the mobile market.

The company, a joint venture between STMicroelectronics and Ericsson, today announced a new strategic direction that will see the firm focus its efforts on a "complete system solution" for smartphones and tablets. The company will focus on delivering application processors, modems, connectivity solutions, and a host of other components to vendors looking to compete in the mobile space. In addition, ST-Ericsson said that it could license the technology it develops to third-parties.

"The Company's ambition so far to directly develop too broad a portfolio of IP required for complete platforms has not delivered the results I want to see," ST-Ericsson CEO Didier Lamouche said in a statement. "By concentrating our efforts on our differentiators and partnering where appropriate, ST-Ericsson can deliver the products our customers want, while ensuring full continuity of our existing roadmap."

ST-Ericsson has watched its market share in the mobile space shrink as its top competitors, Nvidia, Intel, and Texas Instruments, continue to get their components into popular mobile devices. ST-Ericsson has strong ties to Nokia and the former Sony Ericsson (now known as Sony Mobile). However, over the last few years, both of those companies have watched their popularity dwindle, leaving ST-Ericsson with little to show for its efforts. In its three years of operation, ST-Ericsson has lost about $2 billion.

In an attempt to stem those losses, ST-Ericsson said today that it hopes to find $320 million in annualized savings as part of its restructuring. To hit that mark, the company "foresees" a global workforce reduction of 1,700 employees. Although it didn't break out the figures, some of those folks will be left without a job, while others will be transferred to STMicroelectronics.

The STMicroelectronics transfer is part of a broader strategy on the joint venture's part to offload application processor research and development activity and associated employees to its part-owner. After that transfer is completed, ST-Ericcson's entire application processor team will continue its current work and be paid as part of a "transitional cost-sharing model" between STMicroelectronics and Ericsson.

Whether ST-Ericsson will be able to fully implement its plan, however, remains to be seen. Reuters reported last month, citing unnamed sources, that competitors are considering acquiring ST-Ericsson. The companies ostensibly believe that the ST-Ericsson's modems business is a potential upside, and its troubles make it a cheap buy. It also doesn't hurt that ST-Ericsson's technologies were incorporated into 25 percent of all mobile devices sold in 2011, according to the joint venture.

ST-Ericsson's announcement today failed to include mention of a partnership the company has reportedly struck with HTC. China Times is reporting today (translate) that HTC has teamed up with ST-Ericsson to develop its own CPU for lower-end smartphones.

 

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