ST-E has been racking up debt at an alarming rate. So far it's $800m. By the end of the year it'll be $1.7bn if it continues at the current rate. ST is responsible for this debt.
So, yesterday, ST transferred its cost-cutting CFO, Carlo Ferro, to be COO of ST-E.
The hopeful analysis of the Ferro move is that ST top management has got fed up with Ferro's cost-cutting ways and now intends to invest boldly and enthusiastically in the future and wants Ferro out of the way so it can get on with its new investment plans.
The less hopeful analysis is that ST-E employees will be so terrified by Ferro's appointment that they will all leave ST-E in droves so saving ST-E an absolute fortune in redundancy costs.
ST-E has 6,700 employees. Assuming STE can gain a 20% share of the 3G chipset market for smart phones - a market share which is essential because third party developers will only fully support the top two or three chip-sets - and assuming the 2012-13 TAM will be 600m to 700m units with an average price of $8, then STE could command revenues of $1 billion a year.
Assuming a margin of 30%, then this level of sales will permit an R&D budget of about $500 million a year - which allows for the employment - at European salary levels - of about 2000 people.
Making 4,700 professional Continentals redundant is probably more than ST-E can stand. Especially as the French government, on which ST depends for financial assistance, would take a very dim view of wholesale sackings which involved French people.
So the second, analysis, envisages Ferro making life so miserable for ST-E employees that they leave of their own accord.
There's a third analysis. When Ferro found the flash business congenitally loss-making at ST he devised a cunning plan. With Intel, which also had a loss-making flash business, he formed a flash joint venture called Numonyx. This wheezed along unprofitably until it was bought by Micron.
One rather expects it is this third analysis which is currently taking shape in Ferro's accountancy-trained mind.
Of course ST-Ericsson has other problems: the collapse of Nokia its best customer, and the need to find new customers quickly; an obsolescent product line which costs ST-E $1:50 for ever sales $; a new product road map which is very late; and no announced source of 28nm fab.
But you wouldn't employ an accountant to solve those problems.