Ericsson and STMicroelectronics Agree on Strategic Way Forward for ST-Ericsson

Mon Mar 18, 2013 3:40am EDT

* Reuters is not responsible for the content in this press release.

  GENEVA, Mar 18 (Marketwire) -- 
Ericsson (NASDAQ: ERIC) and STMicroelectronics (NYSE: STM) today
announced an agreement on the way forward for the joint venture (JV)
ST-Ericsson. As communicated by the parent companies in December 2012,
both have been working together toward a strategic solution for the JV.
After months of intensive joint work, the parent companies have selected
the strategic option which maximizes their respective future prospects
and growth plans.

    The main steps agreed upon to split up the JV are the following:

--  Ericsson will take on the design, development and sales of the LTE
    multimode thin modem products, including 2G, 3G and 4G multimode
--  ST will take on the existing ST-Ericsson products, other than LTE
    multimode thin modems, and related business as well as certain
    assembly and test facilities
--  Starting the close down of the remaining parts of ST-Ericsson.


The formal transfer of the relevant parts of ST-Ericsson to the
parent companies is expected to be completed during the third quarter of
2013, subject to regulatory approvals. 

    After the split up it is proposed that Ericsson will assume approximately
1,800 employees and contractors, with the largest concentrations in
Sweden, Germany, India and China. 

    It is also proposed that ST will assume approximately 950 employees,
primarily in France and in Italy, to support ongoing business and new
products development within ST.

    Today, it is also announced that Carlo Ferro is appointed President and
Chief Executive Officer of ST-Ericsson, effective April 1, 2013. Ferro is
currently Chief Operating Officer of ST-Ericsson and succeeds Didier
Lamouche who, as previously announced, will pursue opportunities outside
the company. Ferro will lead the work in securing both business
continuity of ST-Ericsson and effective completion of the transition

    Hans Vestberg, President and CEO, Ericsson and Chairman of the Board of
Directors, ST-Ericsson said: "I welcome Carlo Ferro as the new President
and CEO of ST-Ericsson. Carlo has over twenty years of experience in the
semiconductor industry and a strong track record in driving and managing
complex transformation projects. He has been a contributor to the solid
progress ST-Ericsson has made the past year in terms of strategy
execution and significantly lowering the breakeven point." 

    "In line with what we announced in December last year, we have now moved
to the next step of our exit process and found a solution with Ericsson
that fully aligns with our new strategy", said Carlo Bozotti, President
and CEO of ST. "The agreement made with Ericsson represents a major step
forward in reaching our new financial model target and allows us to
further strengthen the skillsets of our company, by welcoming in ST, at
completion, additional strong competences to fuel growth in specific key
product areas. Moreover, it protects and leverages the ongoing
ST-Ericsson's business, allowing us to reinforce our relationships with
key customers, both of ST and of ST-Ericsson".

    With the proposed transfer of competencies from ST-Ericsson, ST will
further strengthen its capabilities in the areas of application
processors, RF, analog and power as well as software and complex system
integration. In addition, ST-Ericsson's portfolio includes devices that
are complementary to ST's focus on the fastest growing segments of the
wireless semiconductor market, such as system-optimized analog mixed
signal and power management devices, high-quality, low-power audio and
video enhancements and innovative energy harvesting solutions.

    The agreement is fully in line with ST's financial model target of an
operating margin of 10 percent or more and with plans to reduce quarterly
net operating expenses to an average quarterly rate in the range of $600
million to $650 million by the beginning of 2014.

    In addition, as a result of the agreement, ST expects to incur cash
costs, including the covering of ST-Ericsson's ongoing operations during
the transition period and its restructuring costs, in the range of
approximately $350 million to $450 million, narrower than the range
provided at the end of January 2013. 

    Forward-looking information 

    This Press Release contains statements of future expectations and other
forward-looking statements (within the meaning of Section 27A of the
Securities Act of 1933 or Section 21E of the Securities Exchange Act of
1934, each as amended). These statements include expectations regarding
our new strategic plan, including expected benefits, future financial and
operating results and expectations regarding events or developments that
we believe or anticipate will or may occur in the future. These
statements are based on management's current views and assumptions, and
are conditioned upon and also involve known and unknown risks and
uncertainties that could cause actual results, performance or events to
differ materially from the forward-looking statements contained in this
Press Release. Such risks and uncertainties include the continuing
difficult macro-economic and industry conditions and trends in the
semiconductor sector and the other risks detailed in our filings with the
Securities and Exchange Commission in particular our Annual report on
Form 20F filed on March 4, 2013. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially which could have a material
adverse effect on our business and/or financial condition. We do not
intend, and do not assume any obligation, to update any forward looking
statements set forth in this Press Release.

    STMicroelectronics Conference Call and Webcast information

    The press release will be available immediately after publication on the
Company's website at

    The management of STMicroelectronics will conduct a conference call on
March 18, 2013 at 9:00 a.m. Central European Time / 4:00 a.m. U.S.
Eastern Time, to discuss the agreement with Ericsson, followed by a Q&A
session. Dial-in information is:
 +41 58 310 5000 (Europe)
 +44 203 059
5862 (UK)
 +1 866 291 4166 (USA)

    A live webcast of the conference call will also be available via the
Internet by accessing

    About STMicroelectronics

    ST is a global leader in the semiconductor market serving customers
across the spectrum of sense and power and automotive products and
embedded processing solutions. From energy management and savings to
trust and data security, from healthcare and wellness to smart consumer
devices, in the home, car and office, at work and at play, ST is found
everywhere microelectronics make a positive and innovative contribution
to people's life. By getting more from technology to get more from life,
ST stands for life.augmented.
 In 2012, the Company's net revenues were
$8.49 billion. Further information on ST can be found at

    Biography for Carlo Ferro

    Carlo Ferro has been the Chief Operating Officer (COO) of ST-Ericsson
since February 2012.

    He has been a Senior Executive Vice President and Chief Financial Officer
of STMicroelectronics since May 2003 and over time his responsibilities
have been extended to include investor relations, treasury, corporate
communication, operation planning, procurement and logistics. He has also
been a member of ST's Corporate Strategic Committee. 

    Ferro joined ST in 1999 as Group Vice President Corporate Finance. In
2002, he became Deputy CFO, and was promoted to Chief Financial Officer
in 2003.

    With ST-Ericsson, Ferro led the execution of a transformation and
restructuring plan that allowed the Company to substantially lower its
break-even point and reduce its losses by 55% in three quarters while
accelerating new-product development by improving R&D efficiency. After
Ferro joined the Company, ST-Ericsson showed improved discipline in
execution, delivering on or above target on almost all metrics in all
quarters. During his tenure as COO, employee motivation and confidence in
the management team improved thru the period, as measured by a
substantially increased score in the employee engagement survey.

    As ST's CFO, Ferro has contributed to executing a strategy of growth
combined with financial discipline: from 2005 through the end of 2011, ST
grew its revenues by about 6% CAGR (ex. divestitures) and improved its
net cash balance by $1.4 billion. In addition, through the market turmoil
of 2008-2011, ST maintained a solid capital structure, improving its net
financial balance and maintaining a credit rating well above investment
grade, while both substantially investing to fuel business growth and
increasing the dividend distribution. Ferro inspired and delivered on
ST's strategy of a focused product portfolio that led to the creation of
Numonyx, a merger of the flash memory businesses of ST and Intel. He also
drove the subsequent merger of Numonyx into Micron Technologies that
allowed ST to improve its capital structure by about $1 billion and
Numonyx' employees to join a sustainable worldwide leader in memories.
With ST, Ferro oversaw several major restructuring efforts that led to a
consolidation of the number of silicon fabs from 17 to 8 and the
reduction of the number of non-manufacturing sites by about one third.
Focusing on execution and financial discipline, under his tenure as CFO,
ST posted quarterly results within guidance for 33 quarters out of 35.
Recognizing his credibility and care of public investors, in 2006 Ferro
was recognized to be among the best European CFOs by Institutional

    At Finmeccanica, the leading Italian high-tech engineering and
manufacturing group and, at that time, a shareholder of SGS-THOMSON
Microelectronics (now STMicroelectronics) from 1992 to 1996, Carlo Ferro
gained extensive experience in Planning and Control, Corporate Finance
and M&A. In fact, he was part of the ST IPO team in 1994 and had been
associated as an expert to the ST Supervisory Board. Over the next three
years, he held executive positions for Elsag Bailey Process Automation NV
(EBPA), a global leader in process automation listed on the NYSE, first
as Vice President for Strategic Planning, and later as Vice President for
Planning and Control and principal financial officer, leading these
functions in phases of acquisitions and consolidation until the merger
between EBPA and ABB.

    Ferro had been the Chairman of Incard SA, the sole Managing Director of
ST Service Srl, a member of the Board and Chairman of the Audit Committee
of ST-NXP Wireless and ST-Ericsson till February 2012. He has also been a
member of the governance bodies of several companies, including STS (a
manufacturing JV in China), ST's affiliates in Singapore, Japan, France
and Italy, a former joint-venture between ST and Hitachi, DNP Photomask
Europe, and, earlier in his career, of several companies in process
automation, engineering, transportation, electronic and power generation

    A Swiss and Italian citizen, born in Savona, Italy, in 1961, Carlo Ferro
is married with two children. A graduate in Business and Economics from
the LUISS Guido Carli University in Rome, where he served as a professor
of Planning and Control and as an associate professor of Advanced Finance
in various periods. He is a Certified Public Accountant registered in

    Ericsson and ST agree on ST-Ericsson: 


For further information, please contact:

Tait Sorensen 
Group VP, Investor Relations
Tel: +1 602 485 2064

Nelly Dimey 
Director, Corporate Media and Public Relations
Tel: +33 1 58 07 77 85 

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