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ST-Ericsson to cut 1,700 jobs in restructuring

Tue, 04/24/2012 - 1:31pm
Maisie Ramsay, Wireless Week

Chip maker ST-Ericsson said Monday it is selling off its application processor business to one of its parent companies and laying off about one-fourth of its staff as part of a major restructuring.

The company, a 50/50 joint venture between Ericsson and STMicroelectronics, has yet to make a profit since its formation in 2009.

“The company’s ambition so far to directly develop too broad a portfolio of IP required for complete platforms has not delivered the results I want to see,” ST-Ericsson President and CEO Didier Lamouche said.

ST-Ericsson’s standalone application processor division will be transferred to STMicroelectronics, which will handle future research and development for the unit.

The deal with STMicroelectronics is part of a broader plan to outsource development of some of its more complex products to “limit and optimize the R&D effort,” it said. More than 85 percent of ST-Ericsson’s employees work in research and development.

ST-Ericsson plans to layoff 1,700 employees, about 25 percent of its 6,700 global workers, as part of the restructuring. The job cuts are aimed at cutting expenses by $320 million a year by the time the restructuring completes at the end of 2013. The company also plans to reduce selling, general and administrative costs by 25 percent.

By overhauling its business, ST-Ericsson will focus on its smartphone and tablet business and shift away from chips for lower-end devices, where sales have been hit hard by declines in Nokia’s Symbian devices.

The troubles with its business were apparent in its first-quarter results, which were released yesterday shortly before the restructuring announcement. Sales dropped 27 percent in the first three months of 2012 to $290 million. The decline in revenue worsened its losses, which swelled to $312 million from $178 million during the same period last year.

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