ST’s Parental Woes

The woes of being an ST-Ericsson parent seem never ending.

On top of running up a $700 million debt – increasing at $200 million a quarter – ST has now announced that it has been ordered to pay $59m to NXP which will cut its Q1 gross margin by 2.6%.


The charge was said to relate to ‘underloading charges’ for wafers supplied by NXP to ST-Ericsson between October 1 2008 and December 31 2009.


Curious that ST-Ericsson’s management didn’t get the price of wafers sewn up.

The charge was imposed by an International Chambers of Commerce arbitration tribunal.

ST says the charge will be taken in its Q2 quarter and will reduce Q2 gross margin to 30.4% plus or minus 1.5%.


The announcement of the expected gross margin reduction had the surprisingly potent effect of knocking 6% off ST’s share price.

ST is expected to have revenues of $2.1bn in Q2.

This level of revenues, if maintained throughout the year, will take ST back to the $8.8 billion annual revenues it recorded in 2005 for a gross margin of 34.2% – the year former CEO Pasquale Pistorio retired.

Tags: share price, wafers

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  1. Mike Bryant
    April 11, 2012 15:06

    Actually the key customer strategy was from Pistorio and generally worked well …. provided you were on their list. I had all sorts of problems with STM a long time ago when they discontinued a wide range of devices without offering us a lifetime buy because they said we weren’t a key account, whilst ignoring the fact our corporate owner most definitely was.

  2. Bitter
    April 11, 2012 12:17

    Oh yes, those clever careerists with Bozo at the helm certainly desire to leave all the difficulties associated with having a vision, respected leadership, innovation, drumming up new customers, embracing risk and effective management, behind.
    Even a half-wit with a passion for technology and engineering likely would do a better job managing ST(E) than a bunch of crummy collectivists.

  3. David Manners
    April 11, 2012 11:17

    Thanks Mike, you’re right I was thinking only of MEMS. Makes Bitter’s comment on the return to the ‘single customer’ strategy rather apt. Nokia represented an eighth of ST’s revenues in 2000, Apple represents a sixteeenth now.

  4. Mike Bryant
    April 11, 2012 10:35

    I had Apple down for US$500m. I think there’s some ST power devices around, either in the display or the charger. Maybe some bits in the Mac psu, audio or mouse as well.

  5. David Manners
    April 11, 2012 08:55

    $314 million less, Bitter. ST had MEMS revenues of $638 million last year, half of which came from Apple.

  6. Bitter
    April 11, 2012 08:42

    I wonder what ST’s revenues would be without Apple?
    Maybe the Bozo(tti) and his buddies desire to revisit the successful “single customer” strategy of STE’s, this time with Cupertino as its main beneficiary?

  7. David Manners
    April 11, 2012 08:37

    Thanks [Anonymous] you’re right. I’ve changed it to Q1.

  8. Anonymous
    April 11, 2012 05:58

    David, I think that ST is taking the hit in Q1, not Q2. Not that it matters…

  9. David Manners
    April 10, 2012 23:57

    Thank you very much Loue

  10. Loue
    April 10, 2012 23:10

    That is not a so old news if Intel put on the market this year a LTE solution based on the experiment of the 200 Dresden engineers previously in charge to develop the LTE layer for NXP four years ago.
    STN Wireless fired them as wedding gift to Ericsson. What a success!
    PS : David you are a gentleman!

  11. David Manners
    April 10, 2012 20:39

    Yes [anonymous] loue wrote in to say the story was old news and not part of the upcoming re-vamp so, in view of that, I thought it wouldn’t be interesting and took it down.

  12. Anonymous
    April 10, 2012 19:54

    Dear David,
    Why your article called “Has ST-E’s Dutch LTE Group Been Sold To Intel?” has been removed?
    It looks interresting regarding Google’s cache!

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