ST-Ericsson Said to Plan Strategy Update for Workers Monday

STMicroelectronics NV (STM) and Ericsson AB (ERICB), having failed to find a buyer for ST-Ericsson, have summoned employees at the unprofitable chip venture for a strategy update tomorrow following a March 15 board meeting, according to two people familiar with the matter.

ST-Ericsson’s worker representatives in France and Italy have been invited to conference calls scheduled for early tomorrow, said the people, asking not to be identified because the plans are private. In France, companies are required by law to inform works councils of decisions that could affect jobs early in the process of any restructuring.

STMicroelectronics and Ericsson are considering winding down the 50-50 partnership, which designs chips used in mobile phones, after a three-month search for a buyer failed to produce results, people familiar with the matter said last week. Ericsson could take back a research site in Lund, Sweden, while STMicroelectronics could integrate a site in Grenoble, France, the people have said.

ST-Ericsson’s other French sites, in Le Mans and Rennes, could also be integrated with Geneva-based STMicroelectronics, while Ericsson may take on some modem assets in Germany and Finland, another person said. ST-Ericsson, whose chief executive officer Didier Lamouche quit last week, will probably ask Chief Operating Officer Carlo Ferro to oversee any changes, the person said.

Alexis Breton, a spokesman for STMicroelectronics in Paris, and Ola Rembe, an Ericsson spokesman in Stockholm, declined to comment.

Moody’s Outlook

Reintegrating workers into the parent companies would help avoid job cuts at ST-Ericsson, which employs 5,000 people, as some European governments, especially Socialist President Francois Hollande-led France, are against firings.

Such a move, however, may weigh on the parent companies’ finances. Moody’s Investors Service on March 15 changed its outlook of STMicroelectronics’s debt to negative from stable, citing concern about a drag on profitability by ST-Ericsson.

“Uncertainty remains around the structure and the cost of the final exit and whether ST will exit only part of the business or overtake some of ST-Ericsson’s current employees or facilities, which could further depress group margins,” Moody’s said in a statement, while confirming STMicroelectronics’s Baa2 rating.

Shares of STMicroelectronics have gained 9.6 percent this year in Paris trading. The stock fell 4.4 percent on March 12 after Bloomberg reported that ST-Ericsson failed to find a buyer. Ericsson has jumped 31 percent in Stockholm this year.

STMicroelectronics and Ericsson have said they want to complete an exit from the partnership, which has accumulated $2.7 billion in net losses since it started in 2009, in the third quarter. ST-Ericsson has struggled to introduce higher- powered chipsets and platforms as the low-end handset business at customer Nokia Oyj (NOK1V) shrank.

To contact the reporters on this story: Marie Mawad in Paris at mmawad1@bloomberg.net; Daniele Lepido in Milan at dlepido1@bloomberg.net; Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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