Reports that STMicroelectronics have failed to find a buyer for ST–Ericsson mean that only one option remains for ST-E and that is closure unless the French government bails it out.
Last December ST committed to exiting from the jv by the end of Q3. Ericsson then said
it would not buy out ST, and would take a Q4 write down charge of $1.2bn for the value of its share in the jv.
On Monday the CEO resigned and no replacement was announced.
The most likely buyer for ST-E was always going to be Samsung. ST has foundry and supplier links with Samsung and talks about ST-E have taken place.
Broadcom and Intel were outside bets for buying ST-E. But, in the end, no one wanted the heavily loss-making company which sprawls over 44 sites in more than half a dozen countries.
Now, it seems, Samsung is not going to take ST-E even though ST and Ericsson have absorbed the accumulated $2.8bn of debt run up by ST-E since it started trading in 2009.
Ericsson and ST put $1.8bn cash into the jv in 2008. ST paid NXP $1.7bn for NXP’s wireless operations.
Ericsson says that its share of the operating loss from the jv is $1.42bn.
Ericsson also says that it expects to incur another $450m of costs before it can get out of the jv.
ST has said it expects to incur another $550m of costs from the jv before it exits in Q3.
It is thought that redundancy costs will amount to about $175m.
The last chance is that France will nationalise the company but a cash-strapped French government might find that electorally unpopular.