STMicro cutting 1,400 jobs, ending set-top chip R&D; BRCM/AVGO could benefit

Jan. 27, 2016 10:24 AM ETSTMicroelectronics N.V. (STM)STM, AVGOBy: Eric Jhonsa, SA News Editor1 Comment
  • Along with its Q4 results, Q1 guidance, and restructuring plans, STMicroelectronics (STM +4%) says it's cutting 1,400 jobs - 430 in France through a voluntary departure plan, 670 in Asia, and 120 in the U.S. The company expects $170M/year in savings and $170M in restructuring costs.
  • Along with the job cuts, STMicro says it's discontinuing "the development of new platforms and standard products" for its set-top and home gateway IC lines. 600 employees will be redployed from the company's set-top chip ops to "support principally ST's growth ambitions in digital automotive and microcontrollers."
  • STMicro: "The slower than expected market adoption of leading-edge products and increasing competition on low-end [set-top] boxes, combined with the required high level of R&D investment, has led this business to generate significant losses in the course of the last years." Broadcom (BRCM -0.1%), which is due to officially be acquired by Avago (AVGO -3.1%) on Feb. 1, has been STMicro's top rival in the set-top/home gateway IC space, and stands to benefit from STMicro's move.
  • The French government has responded to the news by stating STMicro needs a new strategy. Spokesman Stephane Le Foll: "We want a new strategy put in place to allow this company to create value and recover."
  • STMicro continues trading higher post-earnings. Avago is joining other iPhone/iPad suppliers in selling off following Apple's earnings/guidance. the Nasdaq is down 1.2%.

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