Blog
Comment
WW Thinker
Customers are looking for a complete (as complete as possible) solution. Anyone ...
GeeKv2
What good is a phone without cellular connectivity? ST-E can provide the WLAN ...
ST's conundrum: Break up or tweak?
Bolaji Ojo
11/29/2012 12:50 PM EST
Where the challenges begin
That's where the advantages of ST's multi-product offerings end and the challenges begin. If your sales are seesawing the way ST's have been, then there's a fundamental problem with the corporate structure and it's time the company's management finally acknowledge this and take steps to correct whatever ails the enterprise. Analysts predict ST's 2012 revenue will be approximately $8.44 billion, down more than 12 percent from the $9.63 billion it reported in 2011 when sales fell 6 percent from $10.3 billion. Current projections for 2013 aren't that impressive, either, with estimates ranging from as high as $9.75 billion (unrealistic) to as low as $8.7 billion (possible).
The swings in sales performance and margin-related pressures resulted in Standard & Poor's Ratings Agency putting ST on negative watch in August. ST, the research firm said, "is likely to report significantly lower revenues, operating margins, and free cash flows in 2012 than we previously expected, following a weakening of operating results that started in the second half of 2011."
Nothing that has happened since August has dramatically and positively changed ST's profile. The company's digital semiconductor business remains fragile due to problems at Nokia and persistent weak demand in Europe as a result of the region's economic challenges. While ST's analog, MEMs, microcontroller and discrete business have performed satisfactorily, this hasn't been sufficient to stem the losses. ST will likely end 2012 with negative operating margin (estimated by S&P's at about 9 percent) and a net loss for the entire year.
So what should ST be doing to spark growth? The idea of breaking the company into analog and digital businesses is tempting but it will only accelerate the ruin of the weaker digital business. However, ST cannot maintain its structural integrity without making some hard decisions about which markets it continue to compete in. I will address the question above in another report. For now, I believe it's time for ST to say goodbye to ST-Ericsson. Holding on to the business makes no sense notwithstanding the huge investments ST and Ericsson have put in it. The business should go on the block.
ST then might see clearly to address its second major problem: the convoluted ownership structure that puts the French and Italian governments in key positions to call the shots about its future.
Bojaji Ojo is editor in chief of EBN, an EE Times sister site.
Related stories:
That's where the advantages of ST's multi-product offerings end and the challenges begin. If your sales are seesawing the way ST's have been, then there's a fundamental problem with the corporate structure and it's time the company's management finally acknowledge this and take steps to correct whatever ails the enterprise. Analysts predict ST's 2012 revenue will be approximately $8.44 billion, down more than 12 percent from the $9.63 billion it reported in 2011 when sales fell 6 percent from $10.3 billion. Current projections for 2013 aren't that impressive, either, with estimates ranging from as high as $9.75 billion (unrealistic) to as low as $8.7 billion (possible).
The swings in sales performance and margin-related pressures resulted in Standard & Poor's Ratings Agency putting ST on negative watch in August. ST, the research firm said, "is likely to report significantly lower revenues, operating margins, and free cash flows in 2012 than we previously expected, following a weakening of operating results that started in the second half of 2011."
Nothing that has happened since August has dramatically and positively changed ST's profile. The company's digital semiconductor business remains fragile due to problems at Nokia and persistent weak demand in Europe as a result of the region's economic challenges. While ST's analog, MEMs, microcontroller and discrete business have performed satisfactorily, this hasn't been sufficient to stem the losses. ST will likely end 2012 with negative operating margin (estimated by S&P's at about 9 percent) and a net loss for the entire year.
So what should ST be doing to spark growth? The idea of breaking the company into analog and digital businesses is tempting but it will only accelerate the ruin of the weaker digital business. However, ST cannot maintain its structural integrity without making some hard decisions about which markets it continue to compete in. I will address the question above in another report. For now, I believe it's time for ST to say goodbye to ST-Ericsson. Holding on to the business makes no sense notwithstanding the huge investments ST and Ericsson have put in it. The business should go on the block.
ST then might see clearly to address its second major problem: the convoluted ownership structure that puts the French and Italian governments in key positions to call the shots about its future.
Bojaji Ojo is editor in chief of EBN, an EE Times sister site.
Related stories:
- STMicro says there are no plans for breakup
- Why ST should sell ST-Ericsson to China
- ST-Ericsson passing processors to ST, cutting staff
- Electronica: Audi signs NXP, ST as strategic suppliers
- Unified MEMS sensor interface sought
- Electronica: Smart grid will save us, say CEOs
|
|
|
|
|
Navigate to related information
Python
11/29/2012 2:38 PM EST
ST-Ericsson cannot survive against Qualcomm (high end) and Mediatek (low end). They should stop but splitting analog and digital units will not help. Their advantages in the sensor area will decrease as many other suppliers are active in this market.
Sign in to Reply
WW Thinker
11/29/2012 8:08 PM EST
ST-E has much better fundamental core strength than the laughing stock like Renesas Mobile. For this to survive and to prove its might, persistent investment are needed. STM doesn't seem to have the cash. The investment community in Europe has unfortunately been following their greedy counterparts from Wall Streets and is unlikely to put up with the investment. So, the best course is to find a good home for the STE. STM should look east for the takers - Korea or China!
Sign in to Reply
GeeKv2
11/30/2012 10:21 AM EST
Very arrogant of you to say that Renesas Mobile is a laughing stock, especially when you compare it with ST-E. Sorry to say this, but you know too little about the modem industry.
Sign in to Reply
WW Thinker
12/2/2012 10:34 AM EST
ST-E has,over the years, absorbed EMP (Ericsson Mobile Platform), Philips Semiconductor's cellular modem group. Further, STM was a reasonably contender for cellular modem ICs before ST-E was formed. There were trade articles claiming that STM also absorbed some modem related groups from Nokia.
In contrast, Renesas Mobile's core was the former cellular modem groups from Mitsubishi, NEC, Hitachi Semiconductors (more dominated by Mitsubishi). It acquired the over-1000 people team from Nokia when it became a financial and operational burden for Nokia. Considering the contribution of Japanese semiconductors in cellular modems since GPRS and CDMA2000, it is only logical to rate ST-E way above Renesas Mobile. "Laughing Stock" refers to the fact that Renesas Mobile is loosing good money due to bad management since it was formed.
Sign in to Reply
GeeKv2
12/3/2012 10:50 AM EST
Renesas Mobile never existed before Nokia sold its modem division. That should be a clear indication that RM is what former Nokia modem was. The Mitsubishi, Hitachi and NEC alliance was doing mobile multimedia and nothing to do with cellular modems and was later merged with RM. Nokia modem was the first in getting many technologies deployed in handsets.
Sign in to Reply
WW Thinker
12/2/2012 12:05 PM EST
As far as connectivity is concerned, WLAN is the cheapest wireless connection right now, NOT the cellular modem. If you take a large picture view of connectivity, you should see that cellular modem without WLAN is half-baked. Mobile Phone is only a subset of the universe of Connected Devices.
Sign in to Reply
GeeKv2
12/3/2012 10:53 AM EST
What good is a phone without cellular connectivity? ST-E can provide the WLAN solution but its not always that it can provide cellular connectivity. Lets leave it at that as I am not in a position to elaborate.
Sign in to Reply
WW Thinker
12/3/2012 9:12 PM EST
Customers are looking for a complete (as complete as possible) solution. Anyone with a partially baked solution likely fool nobody except their own self. Just an emperor with a new cloth!
Sign in to Reply
SylvieBarak
11/29/2012 9:00 PM EST
If at first you don't succeed, try, try again. I don't see why ST can't keep tweaking the business model until they get it right.
Sign in to Reply
minimal.ath
12/1/2012 4:46 AM EST
Because tweaking a business model (especially by selling/dumping pieces of the company) is not like tweaking hairdos. This strategy isn't suitable even for a startup.
Sign in to Reply
WW Thinker
11/29/2012 10:40 PM EST
If the greedy Wall Street analysts and the fat cats from the big banks are willing to follow your suggestion of "try, try again" to give ST time and money, I'll buy you a ticket from anywhere in the world to Switzerland and pay you for a 5-day decent hotel accommodation.
Sign in to Reply
Murat Terzi
11/30/2012 11:51 AM EST
STM32f4 discovery is the best arm processor available in the world produced by St; But there is insufficient support on all over product portfolia of ST. if you have not a beginner side of view you generally loss...
Sign in to Reply
GREAT-Terry
12/1/2012 11:18 AM EST
I think throwing away some business units that are competitive anymore should be very natural for large companies like STM. I think keeping the MCU , MEMS and analog segments are good but STM really should think about other digital functionalities.
Sign in to Reply
help.fulguy
12/1/2012 1:14 PM EST
Most of the ARM Players are doomed. Look at TI, Freescale, Marvell. ST is not a different story either. When things become commodity, companies involved lose big time. They are all peddling commodity products with MeToo features. They will all get burnt
Sign in to Reply
mranderson
12/3/2012 12:52 AM EST
I tend to agree with the sentiment that offering a me too strategy is not going to lead to growth. But then I look at what Samsung has done relative to Apple. Samsung in many ways has been a successful me too relative to Apple. And the other players are all jealous of both Apple and Samsung.
The Arm players are doing well and Intel is somewhat on the defensive end these days since the PC market is not growing much these days. Most of the Arm players are not doomed.
ST has failed in its wireless business because it is insular and too cautious. Most of ST's American offices are already shutdown or going that way. Bozotti is just a empty suit compared to his predecessor with no vision and most of ST management is like that these days. The governments of Italy and France probably don't have the money to bailout ST. ST will only get broken up when it faces bankruptcy. So I think ST will still exist, but I don't see ST as particularly innovative any more. ST has always focused on the process and not on the end product. So its successes have been more by accident rather than by good management.
Sign in to Reply