Newspaper article International Herald Tribune

Ericsson Reveals Joint-Venture Loss ; $1.2 Billion Write-Down Is Taken over Problems at Component Manufacturer

Newspaper article International Herald Tribune

Ericsson Reveals Joint-Venture Loss ; $1.2 Billion Write-Down Is Taken over Problems at Component Manufacturer

Article excerpt

The charge against fourth-quarter earnings reflects a lower valuation of ST-Ericsson, an unprofitable joint venture with STMicroelectronics that makes cellphone components.

Ericsson, the world's biggest maker of mobile network equipment, said Thursday that it would take a sizable charge against earnings because it was writing down the value of ST-Ericsson, an unprofitable venture that makes cellphone components.

In announcing the charge of 8 billion Swedish kronor, or $1.2 billion, Ericsson told investors Thursday that the charge would reduce its earnings in the fourth quarter by a corresponding 8 billion kronor. Shares of Ericsson fell 1.8 percent to 63.15 kronor in Stockholm trading.

ST-Ericsson, created in February 2009 with STMicroelectronics, a French semiconductor maker, has generated $2.7 billion in losses since its start. On Dec. 10, STMicroelectronics said it intended to "exit" the venture after an unspecified transition period.

Ericsson said it did not plan to buy its French partner's 50 percent stake in ST-Ericsson, a decision that could cast further doubt on the future of the business, which is based in Geneva and employs 5,090 workers.

Bengt Nordstrom, the chief executive of Northstream, a Stockholm- based industry consultant to mobile operators, said that Ericsson, which is also based in Stockholm, could eventually shut down ST- Ericsson after trying to sell it off wholly or in parts. "That is certainly a possibility," Mr. Nordstrom said.

At the time the venture was announced in August 2008, the two partners predicted that the new company, which combined Ericsson's mobile platforms business and STMicroelectronic's ST-NXP wireless businesses, would become a world leader in supplying chips and components to Samsung, Nokia, Sony Ericsson, LG and Sharp.

But ST-Ericsson, which attempted to exploit the value of both partners' intellectual property and patents on components for 2G and 3G handsets and modems using Long Term Evolution, or LTE, technology, has never made a profit as it attempted to attract business from industry leaders in Asia and the U. …

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