) is contemplating a break up of its company that could cause a
sell off of the mobile phone chip segment of their business,
possibly to Samsung.
Premarket, shares of STM are up 15.60 percent on the news, yet
no plans have been announced nor has a timeline for the sell-off.
The ownership regime of the company may be the largest obstacle
to overcome, as management is struggling to deal with lost market
share in Europe and Asia, probably leaving executive level staff
feeling somewhat impotent.
, the French and Italian governments currently control 27.5
percent of the company and are concerned over restructuring
efforts that may cause job cuts, despite shrinking market share
Analyst sentiments surrounding STM have been hesitant about
Samsung's involvement with the company. Bank of America commented
on the most recent news that they were skeptical about the sale
of the ST-E business to Samsung, believing that Samsung is more
interested in 3G patents instead of 3G/4G modem technology.
In a recent report from Bank of America, analyst Simon Woo
wrote, "we believe that if Samsung were interested indeed in
acquiring baseband IP, they could easily achieve this through a
licensing deal with ST-E. This however would not yield the
revenue/profitability gain required for ST-E to become
profitable. In fact, in our view, the news today would suggest
that STM could convert the majority of its internal production to
FD-SOI while using Samsung as a foundry for 28/32nm
high-k-metal-gate (HKMG) production. We therefore doubt this is
an indication that STM is about to close its Crolles 2 fab."
The analog business rumored to be splitting makes up the chips
and sensors used in video game consoles and automobiles from the
digital business, which focuses on handsets and televisions.
Shares of STM closed flat on Thursday and year to date are
down 4.89 percent in addition to the 15 percent loss of share
values since this time last year. As the company's market share
continues to shrink, so do the number of options faced in regards
to the business split.
Customers like Nokia (NYSE:
) and Research In Motion (NASDAQ:
) have contributed to the decline in business and loss in market
share to competitors, and a sell off of the digital assets could
help the company focus more on its analog business and help
separate STM from being dragged down by negatively-pressed
wireless solutions companies.
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.