Ericsson, STMicro close mobile merger deal

Ericsson and STMicroelectronics have completed a deal announced last year to combine their mobile chip operations.

Ericsson and STMicroelectronics have completed a deal announced last year to combine their mobile chip operations.

The transaction combines Ericsson Mobile Platforms with ST-NXP Wireless in a 50/50 joint venture and continues the consolidation of the mobile equipment industry. The venture begins its life as a supplier to four of the world's biggest handset makers, which together make about 80 percent of all mobile phones, the companies said.

The deal was announced last August, before business became even more challenging for handset makers. Earlier this month, Nokia reported a 19 percent drop in fourth-quarter sales, and on Tuesday Motorola posted a fourth-quarter loss of US$3.6 billion and a 50 percent drop in phone sales.

The joint venture brings together part of Ericsson, one of the world's largest communications technology companies, with a joint venture that STMicroelectronics had formed earlier with chipmaker NXP. Ericsson contributed $1.1 billion to the joint venture, and STMicroelectronics exercised an option to buy out NXP's portion of ST-NXP Wireless.

The new business has about 8,000 employees -- about 5,000 of them from STMicroelectronics -- and is based in Geneva. It will be led by President and CEO Alain Dutheil, who has been CEO of ST-NXP Wireless and chief operating officer of STMicroelectronics. Each partner will have four seats on the venture's board.

The partners said last year they wanted to create the venture to achieve greater scale. The new company will supply hardware, software and support to handset makers building devices for a wide range of networks, from 2G (second-generation) to LTE (Long-Term Evolution). In addition, ST-NXP is a supplier of TD-SCDMA (Time-Division Synchronous Code-Division Multiple Access), a Chinese 3G standard. The two companies bring in supplier relationships with customers including Nokia, Samsung Electronics, LG, Sharp and Sony Ericsson Mobile Communications, Ericsson's own handset joint venture.

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