Ericsson and STMicro create joint-venture

The fabless joint venture will employ almost 8,000 people with pro-forma 2007 sales of USD 3.6 b. ST is expected to exercise its option to buy NXP's 20% of ST-NXP Wireless before the closing of this transaction. In the joint venture, ST contributes its multimedia and connectivity solutions as well as a complete 2G/EDGE platform and strong 3G offering, including customer relationships with Nokia, Samsung, and Sony Ericsson. Ericsson contributes its 3G and LTE platform technology as well as customer relationships with Sony Ericsson, LG and Sharp. The joint venture, staffed by proven professionals across all functional areas, is designed for long-term stability in its original structure, and is set to operate in product research, as well as design, development, and the creation of cutting-edge mobile platforms and wireless semiconductors. The joint venture's top-tier and broad customer base will also benefit from a tighter relationship that follows from the success of the existing cooperation between ST and Ericsson. The businesses being combined are major suppliers to four of the industry's top five handset manufacturers, who together represent almost 80% of handset shipments, as well as to other exciting industry leaders. The joint venture will rely on its complete platform offering, which will include modems, multimedia and connectivity solutions for 2G/EDGE, 3G, HSPA and LTE technologies. It will also include all appropriate hardware, software and support to enable handset manufacturers to develop mass-market products. Ericsson Mobile Platforms has state-of-the-art mobile modem design and mobile terminal architecture expertise and ST-NXP Wireless brings vast experience in wireless semiconductor development, including an industry-leading ASIC, ASSP, Application Processor and connectivity portfolio and hardware assembly and testing. The business in the 50/50 joint venture will be led by a development and marketing company with approximately 7,000 people employed. This company will be consolidated by ST and Ericsson will account for it using the equity method. A separate platform design company, with approximately 1,000 people employed, will provide platform designs to the development and marketing company. Ericsson will consolidate this company and ST will account for it using the equity method. Of the almost 8,000 people employed, almost 5,000 will be from ST-NXP Wireless and roughly 3,000 will be from Ericsson Mobile Platforms. The new company will be fabless and will use silicon technologies and manufacturing capabilities from ST and other external providers. The joint venture will be headquartered in Geneva, Switzerland and governance will be balanced. Each parent will appoint four directors to the board and Ericsson will designate Carl-Henric Svanberg as the Chairman of the Board while ST will appoint Carlo Bozotti as the Vice Chairman. In addition, ST will designate the Chief Executive Officer and Ericsson will appoint the Executive Vice President to the company. An integration management team, led by Alain Dutheil, has already been selected. The joint venture will acquire relevant assets from the parent companies. After these acquisitions the joint venture will have a cash position of about USD 0.4 b. Ericsson will contribute USD 1.1 b. net to the joint venture, out of which USD 0.7 b. will be paid by the joint venture to ST. The joint venture is subject to ordinary regulatory approvals.