Bloomberg News

STMicroelectronics Said to Cool on Splitup Amid Discord

November 16, 2012

STMicroelectronics NV Chief Executive Officer Carlo Bozotti

STMicroelectronics NV Chief Executive Officer Carlo Bozotti. Photographer: Antoine Antoniol/Bloomberg

STMicroelectronics NV (STM), Europe’s largest semiconductor maker, will probably decide against splitting itself into two units after disagreements between French and Italian executives over the breakup proposal, according to people familiar with the situation.

The split under consideration between analog and digital businesses hasn’t won the full support of STMicroelectronics’ board, and will probably be shelved in favor of smaller asset sales, said the people, asking not to be identified discussing private deliberations. French executives including Chairman Didier Lombard and Chief Operating Officer Didier Lamouche had failed to convince the chipmaker’s Italian chief executive officer, Carlo Bozotti, to support the plan, they said.

Strategy chief Philippe Lambinet, who left the Geneva-based company in September, was a key supporter of a split, the people said. Lacking a unified management position, the company would struggle to convince the French and Italian governments, which together control 27.5 percent of its shares, to back such a dramatic overhaul, one of the people said.

STMicroelectronics reiterated in a statement yesterday that it has no plans to divide the company.

“Such a project has never been presented to the ST supervisory board,” STMicroelectronics said. “There is full alignment between the management of the company and the supervisory board of directors.”

Shares Fall

STMicroelectronics fell 2.3 percent today in Paris to 4.23 euros. On Oct. 12, the French shares rose as much as 19 percent, the biggest intraday gain since it started trading in 1994, after Bloomberg News reported the breakup evaluation.

The semiconductor manufacturer has been dragged down by its digital business, which manufactures chips for handsets and set- top boxes, as key customers like Nokia Oyj (NOK1V) and BlackBerry maker Research In Motion Ltd. (RIM) see their own sales decline.

More broadly, European semiconductor makers have struggled to cope with the industry’s sharp price and demand swings. They are losing market share to Asian and U.S. competitors who have switched to so-called fabless models, dispensing with factories in favor of outsourcing to foundries such as Taiwan Semiconductor Manufacturing Co. (2330) That allows semiconductor makers to adjust their designs and production more quickly without the overhead of running their own plants.

Industry Shrinks

The global semiconductor industry will shrink 2 percent in 2012, researcher Exane said in September, after previously predicting an increase of 1 percent.

Rather than splitting the company, STMicroelectronics may seek gradual, closer integration with South Korea’s Samsung Electronics Co. (005930), which already manufactures some advanced chips on its behalf, one of the people said.

Nam Ki Yung, a Seoul-based spokesman for Samsung, declined to comment.

The South Korean firm has spent more than $1.4 billion on deals this year to bolster access to technology and materials for phones and tablets, including a $310 million July deal for the wireless unit of British semiconductor manufacturer CSR Plc. (CSR) Samsung is locked in a global legal battle with Apple Inc. (AAPL:US) over intellectual property, with the two companies accusing each other of misusing patents in popular mobile devices like the iPhone and Nexus handsets.

To contact the reporter on this story: Matthew Campbell in London at mcampbell39@bloomberg.net

To contact the editor responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net


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