Ericsson’s Q4 net income to hit by SEK 8 billion due to 50% stake in ST-Ericsson

Telecom Lead Europe: Wireless equipment major Ericsson’s Q4 net income will hit by SEK 8 billion on account of its 50 percent stake in ST-Ericsson.

The charge includes write down of assets to reflect the current best estimate of Ericsson’s share of the fair market value of the JV, as well as additional charges related to the available strategic options for the future of the ST- Ericsson assets.

According to industry analysts, several telecom equipment vendors including are facing major revenue cuts in Q4 2012. This is mainly due to decline in Capex by mobile operators.

Recently, STMicroelectronics announced its plan to exit from ST-Ericsson.

In April 2012, ST-Ericsson announced its strategic plan and is currently executing plans to lower its break-even point and introducing new technologies.

According to Ericsson, modem technology has a strategic value for the wireless industry. For Ericsson, a key priority in this process is a successful market introduction of the new LTE modems which Ericsson is certain will be very competitive and needed in the market.

Ericsson will continue to explore various strategic options for the future of ST-Ericsson assets. To acquire the full majority of ST-Ericsson is, however, not an option. Ericsson’s current best estimate is that the implementation of the strategic options at hand will require approximately SEK 3 billion of Ericsson funding, of which the majority in 2013.

The wireless equipment major has recently picked up stake in Telcordia to strengthen its OSS offerings.

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