Ericsson (ERIC) Sees $1.2B Charge in Q4 Tied to ST-Ericsson Stake
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Ericsson Telephone Company (Nasdaq: ERIC) announced that it will take a non-cash charge of approximately SEK 8 b. in Q4, 2012 related to its 50% stake in ST-Ericsson. The total effect on Ericsson Group Net Income Q4, 2012, is approximately SEK -8 b. (non-cash), with no tax effect.
*** The current SEK-to-USD exchange rate pegs the amount at $1.22 billion.
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.
ST-Ericsson announced its strategic plan in April 2012 and is in the middle of executing on company transformation aiming at lowering its break-even point and introducing new technologies. On October 9, 2012, the two parent companies announced a strategic review of the business plan and the future ownership structure. On December 10, 2012, STMicroelectronics (NYSE: STM) announced its intention to exit as a shareholder in ST-Ericsson.
Ericsson continues to believe that the modem technology, which it originally contributed to the JV, 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 b. of Ericsson funding, of which the majority in 2013.
Ericsson will provide any additional financial information in conjunction with the Q4 report 2012.
During the process of exploring options Ericsson will not speculate on the possible outcomes, timelines, and future strategic alternatives for ST- Ericsson assets.
*** The current SEK-to-USD exchange rate pegs the amount at $1.22 billion.
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.
ST-Ericsson announced its strategic plan in April 2012 and is in the middle of executing on company transformation aiming at lowering its break-even point and introducing new technologies. On October 9, 2012, the two parent companies announced a strategic review of the business plan and the future ownership structure. On December 10, 2012, STMicroelectronics (NYSE: STM) announced its intention to exit as a shareholder in ST-Ericsson.
Ericsson continues to believe that the modem technology, which it originally contributed to the JV, 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 b. of Ericsson funding, of which the majority in 2013.
Ericsson will provide any additional financial information in conjunction with the Q4 report 2012.
During the process of exploring options Ericsson will not speculate on the possible outcomes, timelines, and future strategic alternatives for ST- Ericsson assets.
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