Once upon a time when Nokia was the leading mobile phone manufacturer in the world, ST Ericsson had a good business manufacturing mobile processors, this is because most of its orders came from Nokia. But a few years back, when the Finnish smart phone manufacturer lost its market share to Apple and Samsung, its orders for ST Ericsson’s chips also came down, sending ST Ericsson into a loss. And if you do not know, ST Ericsson is the result of the collaboration between ST Micro and Ericsson.
So after this happened, the two companies have decided to dissolve their partnership and go their own ways. This is not good for both the companies, a few hundred employees in the company as they will be losing their jobs. Ever since ST Ericsson lost its chip making business’s market share to its competitors such as Nvidia, Intel, Texas Instruments, Samsung, and others, Ericsson’s share alone in the losses has become $2.8 billion.
“All possible scenarios were considered but the option announced today was always a real possibility,” STMicro Chief Executive Officer Carlo Bozotti said in a conference call today, according to a Reuters account of the call.
The two companies will now be dividing the business into two parts and each company will take the part that it is interesting in. And some of the parts, which neither of the company is interested in, will be left out in the wild to dissolve by itself. And from these parts of the business which both the companies do not want, 1,600 jobs will be lost.
Ericsson has planned on keeping 1,800 employees on board, mostly in Sweden, Germany, India and China, and ST Micro will be retaining about 950 employees, primarily in France and Italy. CNET writes:
STMicro said it expects the closing and restructuring to cost $350 million to $450 million, less than the $500 million it estimated in January. Ericsson said it had reserved $516 million in 2012 to pay for the moves. “We obviously have the ambition of making this profitable … and with a slimmer organization I believe we have a much greater chance of getting there,” Vestberg said.