Poor Nokia sales drag down ST-Ericsson earnings

The cash-haemorrhaging joint venture between STMicro and Ericsson has revealed even deeper losses than before, which it has blamed on the change of business at key customer Nokia

ST-Ericsson, which designs mobile semiconductors, has revealed deepening losses that are partly attributable to declining sales at key customer Nokia.

Nokia Lumia 800

Nokia's switch to Windows Phone handsets such as the Lumia 800, above, has affected revenues at chip designer ST-Ericsson. Image credit: Ben Woods

In its fourth-quarter earnings report on Monday, the chip designer said it made a net loss of $231m (£148m), compared with a loss of $211m in the previous quarter and $177m a year ago. The fabless joint venture between STMicroelectronics and Ericsson has not turned a quarterly profit since being founded in 2009.

ST-Ericsson supplies chips for Nokia's older Symbian phones, which are losing market share to rivals, particularly low-cost Android phones. In November, Nokia selected ST-Ericsson's NovaThor system-on-a-chip (SoC) to power its Windows Phones, which are now the main focus for the Finnish handset maker.

However, it appears that Nokia's Windows Phone sales are not yet off-setting the reduction in Symbian sales, which is having a knock-on effect on ST-Ericsson.

"For ST-Ericsson, managing the wireless joint venture's shift from a legacy portfolio to the new product roadmap has proven more challenging than expected, given the change in the business of one of their largest customers and its evolving plans," STMicro chief executive Carlo Bozotti said in a statement.

"While the new portfolio is beginning to ramp, the current results of ST-Ericsson are still distant from the financial prospects we are envisioning," he added.

Bozotti also explicitly told the Financial Times that Nokia was the customer in question, and that the Finnish handset maker's revenues had "collapsed". An STMicro spokesman confirmed this to ZDNet UK on Tuesday.

Nokia Lumia sales 

Analysts polled by Bloomberg expect sales of Lumia handsets, the first to arrive from the Microsoft-Nokia alliance, to total 1.3 million for the last two months of 2011. Unlike the Lumias, the Symbian phones that made up Nokia's traditional line-up were lower-cost, but sold in large quantities.

Didier Lamouche, the recently installed chief executive of ST-Ericsson, forecast much of the same for the immediate future. "Sales and operating results will continue to be challenging over the coming quarters, due to the reduction in the short term of new product sales with one of our largest customers," Lamouche said in the statement.

The sales of Nokia's Windows Phones will come into sharper relief on Thursday, when Nokia announces its results for the fourth quarter of 2011. However, the news of ST-Ericsson's Nokia-related losses was enough to push the handset manufacturer's share price down by almost seven percent on Monday.

Bloomberg's average of analyst estimates suggested on Tuesday that Nokia probably lost €91.6m (£76.5m) during the quarter, with sales down 21 percent.

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