STMicroelectronics NV (STM) climbed as much as 6.4 percent in Paris trading after its chipmaker venture with Ericsson AB said it will reduce the number of research sites to lower costs and meet profit targets.
STMicroelectronics, based in Geneva, surged as much as 34.4 cents in Paris and was up 5.9 percent at 5.67 euros at 2:24 p.m, making it the biggest winner on France’s CAC 40 Index. ST- Ericsson Chief Executive Officer Didier Lamouche said in an interview today that the venture will have to make “clear sacrifices” to meet a goal of generating “sustainable” profit.
“We have 44 sites and reducing that is not going to be done easily,” Lamouche said at the Mobile World Congress in Barcelona, when asked whether he will also cut jobs. “We will have to do clear sacrifices.”
Lamouche was named CEO in November, the company’s third in as many years, to help the venture gain share in the growing market for smartphone chips. ST-Ericsson, based in Geneva, hasn’t been profitable since its formation in 2009 as its newer smartphone and tablet chips haven’t been able yet to make up for a decline in sales of older chip lines.
ST-Ericsson said last month that its fourth-quarter net loss widened to $231 million from $177 million a year earlier while net sales fell 29 percent to $409 million. The company plans predicts to “stabilize” revenue and losses this year and “improve” sales and earnings in 2013, Lamouche said today, adding that the company plans to generate a “sustainable” profit by the end of 2014.
“We have opportunities to reduce costs” Lamouche said. In addition to fewer sites, the company will make cuts in purchasing expenses, finance and accounting, he said.
Lamouche said spending on research and development will be contained by using resources together with the parent companies and other parties, which he declined to name.
The CEO also said the company is building stronger relationships with multiple equipment vendors, after years of relying largely on two companies, Nokia Oyj (NOK1V) and Sony Ericsson Mobile Communications, the former mobile-phone joint venture that was acquired by parent Sony Corp. (6758)
“We are engaging with seven of the nine top handset manufacturers,” Lamouche said. “With five of them we are actually making phones with, and four of them have put phones with our products in them on the market.”
ST-Ericsson will announce a strategic plan in a few weeks to give more details on the cost cuts and other forecasts, the CEO said.
Stockholm-based Ericsson climbed 0.5 percent to 66.85 kronor in the Swedish capital.
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