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Technology Stocks : 3G Wireless: Coming Soon or Here Now?

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To: Eric L who wrote (656)2/7/2009 1:53:25 PM
From: Eric L   of 666
Creating the Worlds 3rd Largest Wireless IC Manufacturer

... and a Pan-European power to rival and compete with Qualcomm and TI of the USA.

What was the ST-NXP Wireless joint venture, is now as of last week formally an STMicroelectronics-Ericsson (EMP) JV and NXP's investment has been closed out per their original agreement with STMicro. The formal name of the new JV venture has not been announced, and a new website has not yet been created or become operational. The STP-NXP Wireless website [ ] is still operational although it hasn't been updated for the last 2 months and as of yet there is no redirect.

The JV will be fabless and it become the 2nd largest fabless wireless IC semiconductor enterprise although one of the parents operates foundries and while a stalwart of the fab model it has been evolving to a fab-lite model, and probably a chip packaging source, but STMicro will likely not be single source to the new parent. Ericsson Mobile Platfoms (EMP) has of course been a fabless 2G/2.5G/ and 3GSM UMTS (WCDMA) merchant chip supplier from its inception and its customers for 3GSM ASICS have been the Sony Ericsson handset JV, Sharp, LG, et al., and they will be customers or potential customers of the new venture. Major customers of STP-NXP were Nokia, Samsung, Sony Ericsson, LG and Sharp.

ST-NXP had originally planned to use Nokia modem IP for custom 3GSM ASICs for the Finns with first commercial silicon in 2010, and also license that IP for use in their 3G merchant range. Since Ericsson integrates its own IP in its merchant silicon that will likely change.

Based on CY 2008 results ...

"... the new company will have pro forma sales of $3.6 billion, focusing on current and future mobile telephony technology to rival that of Qualcomm (QCOM.O) and supply four of the world's five leading handset makers. It will employ 8,000 staff."
- Reuters 2/3/09 -

The above projected combined revenue sales assume they maintain 2008 sales. That certainly isn't a given in a down handset year. Same for Qualcomm whose QCT division had revenues of $6.717 Billion in FY 2008, ~1.9x that of the new competitive JV.

There is some background and a Key Events Chronology of the events leading to the formation of the ST-NXP and ST-Ericsson JV back through 2003 with supporting press releases or commentary in a prior post here ...

Message 25133754

Below are a few clips chronicling the completion of the Ericsson entree and NXP close out ...

>> STM Forms Ericsson JV After Buying Out NXP

Matt Gil and Tarmo Virki
Reuters (Paris/Helsinki)
February 3, 2009

• STM buys NXP's stake in ST-NXP for $92 mln

• STM, Ericsson close merger of wireless chip ops

• appoints STM's Dutheil as J/V CEO

STMicroelectronics (STM.PA) said on Tuesday it had bought NXP's [NXP.UL] stake in the ST-NXP Wireless joint venture for $92 million, removing the last obstacle from merging the venture with Ericsson's chip business.

The Franco-Italian chipmaker STMicro and Swedish telecom gear maker Ericsson (ERICb.ST) closed the merger of their mobile chip and software businesses on Tuesday, appointing Alain Dutheil as chief executive officer of their 50-50 joint venture.

The new company will have pro forma sales of $3.6 billion, focusing on current and future mobile telephony technology to rival that of Qualcomm (QCOM.O) and supply four of the world's five leading handset makers. It will employ 8,000 staff.

Ericsson paid $700 million to STM, and put a further $400 million into the venture. (Reporting by Matt Gil and Tarmo Virki, editing by Will Waterman)

>> Ericsson, STMicro Close Mobile Merger Deal

Stephen Lawson
IDG News Service
February 3, 2009

Ericsson and STMicroelectronics have completed a deal announced last year to combine their mobile chip operations.

The transaction combines Ericsson Mobile Platforms with ST-NXP Wireless in a 50/50 joint venture and continues the consolidation of the mobile equipment industry. The venture begins its life as a supplier to four of the world's biggest handset makers, which together make about 80 percent of all mobile phones, the companies said.

The deal was announced last August, before business became even more challenging for handset makers. Earlier this month, Nokia reported a 19 percent drop in fourth-quarter sales, and on Tuesday Motorola posted a fourth-quarter loss of US$3.6 billion and a 50 percent drop in phone sales.

The joint venture brings together part of Ericsson, one of the world's largest communications technology companies, with a joint venture that STMicroelectronics had formed earlier with chipmaker NXP. Ericsson contributed $1.1 billion to the joint venture, and STMicroelectronics exercised an option to buy out NXP's portion of ST-NXP Wireless.

The new business has about 8,000 employees -- about 5,000 of them from STMicroelectronics -- and is based in Geneva. It will be led by President and CEO Alain Dutheil, who has been CEO of ST-NXP Wireless and chief operating officer of STMicroelectronics. Each partner will have four seats on the venture's board.

The partners said last year they wanted to create the venture to achieve greater scale. The new company will supply hardware, software and support to handset makers building devices for a wide range of networks, from 2G (second-generation) to LTE (Long-Term Evolution). In addition, ST-NXP is a supplier of TD-SCDMA (Time-Division Synchronous Code-Division Multiple Access), a Chinese 3G standard. The two companies bring in supplier relationships with customers including Nokia, Samsung Electronics, LG, Sharp and Sony Ericsson Mobile Communications, Ericsson's own handset joint venture. ###

>> Ericsson and STMicroelectronics Complete Deal to Create World Leader in Semiconductors and Platforms for Mobile Applications

Ericsson PR
February 3, 2009

STMicroelectronics (NYSE:STM) and Ericsson (NASDAQ:ERIC) today announced the closing of their agreement merging Ericsson Mobile Platforms and ST-NXP Wireless into a 50/50 joint venture. The deal was completed on the terms originally announced on August 20, 2008.

The new company is designed for long-term stability and is set to become an industry leader in product research, as well as design, development, and the creation of cutting-edge mobile platforms and wireless semiconductors. The JV begins as a major supplier to four of the industry's top five handset manufacturers, who together represent about 80 percent of global handset shipments, as well as to other exciting industry leaders.

Ericsson contributed USD 1.1 billion net to the joint venture, out of which USD 0.7 billion was paid to ST. Prior to the closing of the transaction, ST exercised its option to buyout NXP's 20 percent ownership stake of ST-NXP Wireless.

Alain Dutheil, presently CEO of ST-NXP Wireless and Chief Operating Officer of STMicroelectronics, will lead the joint venture as President and Chief Executive Officer.

Governance is balanced. Each parent appoints four directors to the board with Carl-Henric Svanberg, President and CEO of Ericsson, as the Chairman of the Board and Carlo Bozotti, President and CEO of STMicroelectronics, as the Vice Chairman.

Employing about 8,000 people - roughly 3,000 from Ericsson and approximately 5,000 from ST - the new global leader in wireless technologies is headquartered in Geneva, Switzerland.

The new company will meet its customers at the Mobile World Congress in Barcelona from Feb 16 to Feb 19. ###

>> STMicroelectronics calls NXP’s 20% shareholding in ST-NXP Wireless

Eindhoven, The Netherlands
February 3, 2009

NXP Semiconductors today announces that STMicroelectronics has purchased NXP's 20 percent stake in ST-NXP Wireless.

On August 20 of last year STMicroelectronics and Ericsson Mobile Platforms announced an agreement to merge Ericsson Mobile Platforms and ST-NXP Wireless into a 50/50 joint venture. STMicroelectronics indicated at that date that it expected to exercise its call option to buy NXP's 20 percent of ST-NXP Wireless before the closing of this transaction.

The agreed purchase price is USD 92 million. This price is based on the performance of ST-NXP Wireless business in the last twelve months (sales and EBITDA). The transaction is effective as per February 2 ###

>> Alain Dutheil Becomes CEO of ST-NXP-Ericsson Wireless Joint Venture

David Manners
Electronics Weekly
3 February 2009

Alain Dutheil, COO of STMicroelectronics, has been appointed CEO of the ST-NXP-Ericsson joint venture in wireless ICs. Dutheil had previously been appointed to head the transition team of ST-NXPWireless which was absorbing the wireless IC activities of ST and NXP.

Now that ST has bought out NXP’s final 20 per cent stake in ST-NXP Wireless, NXP has no further interest in the joint venture.

The price paid by ST for the remaining 20 per cent stake in ST-NXP Wireless was $92m, a sum which was said to be based on the performance of ST-NXP Wireless over the last year.

Since ST paid $1.5bn for the 80 per cent share in ST-NXP it bought last year, the new valuation of $92m for a 20 per cent share suggests that NXP got a very good deal.

The wireless IC market has deteriorated sharply in the last 12 months with Freescale Semiconductor finding itself unable to find a buyer for its wireless division and now looking to sell it off piece-meal.

Now that NXP is out of the equation, the ST-Ericsson joint venture, which has now been finalized, will be owned 50-50 by ST and Ericsson. To acquire its stake, Ericsson paid $700m to ST and put another $400m into the joint venture.

Both ST and Ericsson each appoint four directors to the board of the joint venture. Chairman of the joint venture is Carl-Henric Svanberg, CEO of Ericsson; Vice Chairman is ST CEO, Carlo Bozotti.

The joint venture’s existing customers include four out of the five top handset makers, and employees number 8,000. ###

- Eric -
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