* Charge mainly related to writing off loans to JV
* Says not an option to buy out JV partner STMicro
* Charge seen driving Ericsson to a Q4 loss
* Shares down 2.9 pct
(Adds background, analyst comment)
By Simon Johnson and Olof Swahnberg
STOCKHOLM, Dec 20 Ericsson is taking
a $1.2 billion charge in a bid to write off its exposure to
ST-Ericsson, adding to doubts over the future of the loss-making
joint venture after partner STMicroelectronics said it
was pulling out.
Ericsson, the world's biggest equipment maker for mobile
telecom networks, said on Thursday it would take the 8 billion
Swedish crown hit in its fiscal fourth quarter in a move set to
plunge it into a net loss for the three month period.
The Swedish group said it would not buy STMicro's
50-percent stake in the mobile chip making venture, confirming
its previous indications and leaving the future of the venture's
5,000 employees staff looking uncertain.
Analysts think ST-Ericsson's wireless modem business could
be attractive to a competitor like Samsung and that
Ericsson could retain its power management solutions business.
But the rest of the venture's operations may just be shut down.
"Two thousand jobs are at risk whatever the scenario," said
Jerome Ramel, analyst at Exane BNP Paribas. "If they just shut
it down, it is even more."
Ericsson has been struggling recently with a slowdown in
sales at its core network unit due to competition and a
faltering global economy. In October it reported a 42 percent
drop in third-quarter core earnings.
Profits have also been squeezed by its loss-making
joint-ventures, mobile phone maker Sony Ericsson - which it has
sold - and ST-Ericsson, which has not made a profit since it was
formed in 2009 as key customer Nokia struggled to
compete in smartphones with the likes of Apple and
Successive cost-cutting plans, including an April
announcement of 1,700 job cuts and the transfer of some product
development to STMicro, have failed to staunch its losses.
ON LIFE SUPPORT
STMicro said earlier this month it would quit the venture in
2013, handing responsibility for its future to Ericsson, which
also wants to wash its hands of the unit so it can focus on
reviving sales at its key networks unit.
Ericsson warned in October it might have to take a write
down on ST-Ericsson, which has lost more than $1.5 billion
excluding restructuring charges over the last three years.
"A writedown wasn't entirely unexpected given STMicro's
plans," said one analyst who declined to be named, though he
added that Ericsson's charge was larger than he had expected.
At 1155 GMT, Ericsson shares were down 2.9 percent at 1100
GMT, underperforming the DJ Stoxx 600 European technology index
which was down 0.8 percent.
"Ericsson will continue to explore various strategic options
for the future of ST-Ericsson assets," the Stockholm-based
company said, while declining the comment on the details.
"To acquire the full majority of ST-Ericsson is, however,
not an option."
The charge was mainly related to writing off loans to the
joint venture, as well as funding for the business while its
future is determined, Ericsson said.
Bengt Nordstrom, CEO of telecoms consultancy Northstream,
said ST-Ericsson's future had looked bleak since Nokia chose
U.S. software giant Microsoft as a partner.
"Since then, it has been on life support," he said.
The average estimate for Ericsson's fourth-quarter net
profit is 3 billion crowns, according to Reuters Starmine. The
firm last made a net loss in the third quarter of 2003.
($1=6.5388 Swedish crowns)
(Reporting by Simon Johnson; Editing by Mark Potter)