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December 21, 2012

Ericsson demands $1.2bn charge to write down ST-Ericsson stake

Ericsson said it would charge SEK8bn to offset the reduction of SEK8bn of its earnings Q4 2012.

By CBR Staff Writer

Ericsson is demanding a $1.2bn charge to write off its exposure to ST-Ericsson, a venture that produces cellphone components.

Established in February 2009 with STMicroelectronics, ST-Ericsson has generated $2.7bn in losses since its launch, and recently revealed its intention to exit the venture as part of its strategic plans to cut costs.

The new plan is aimed at increasing the firm’s operating margin to around 10%. The firm is reducing operating expenses to $600m from $650m per quarter from 2014.

Ericsson has been battling against a slowdown in sales at its core network unit due to increasing competition and an uncertain global economy.

The firm’s successive cost-cutting plans, which included slashing 1,700 jobs in Apriland the transferring some of its product development duties to STMicro, were unsuccessful in stopping losses.

The Swedish telecoms manufacturer had exited from the handset market in February, following the sale of its 50% stake in Sony Ericsson to Sony.

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