Citi Urges Curtailment of ST’s Digital Business
Citi Research looks at the whether ST should close, curtail or hive off the digital business.
The dilemma for ST is that French government and EU financial support for the company is largely aimed at digital.
So, while digital capability is what the political masters of Europe want, most of ST’s profits come from analogue, passives, discretes and MEMS.
Citi, like the other financiers, wants ST’s digital business curtailed, but Citi undermines its case by arguing that it’s too early to judge FD – SOI..
Clearly ST’s digital strategy is predicated on FD-SOI. If the technology delivers on its promise and enables cheaper consumer electronic products than finfet, then it’s a slam dunk that ST will grow a successful digital business.
Obviously it is too early to make strategic decisions about ST’s future in digital until FD-SOI either delivers or doesn’t deliver.
Citi regurgitates the argument that ST’s digital business is too small to take on its competitors – which is like saying that Apple’s phone business in 2007 was too small to take on Nokia and Blackberry.
Citi also says ST’s cost structure is too rigid and its management too hierarchical. That, of course, can be changed – the CEO’s contract is up next year.
Citi also argues that digital has few attractive end markets making you wonder which planet Citi are on. The markets for digital mobile products are going gang-busters – never has there been such a public thirst for all products digital and mobile as there is now.
So Citi is talking up its book as a typical financial entity wanting quick profits before long-term viability.