- Buyers Guide
ST and NXP Form Wireless Joint Venture
NXP and STMicroelectronics have agreed to combine key wireless operations to form a joint venture company with strong relationships with all major handset manufacturers. The combined venture will be created from successful businesses that together generated $3 B in revenue in 2007 and will own thousands of important communication and multimedia patents. The new company will have the scale to better meet customer needs in 2G, 2.5G, 3G, multimedia, connectivity and all future wireless technologies. It will be a solid top-three industry player with the scale and expertise to pursue the R&D investments necessary to establish itself as a leading player in the wireless and mobile-multimedia market.
In order to create a clear ownership structure, STMicroelectronics will take an 80 percent stake in the joint venture. NXP will receive $1.55 B from ST, including a control premium, to be funded from outstanding cash (cash and cash equivalents balance for ST at year end 2007 were $3.5 B). The new organization is designed to be in a very healthy financial position, without debt, and able to grow its business with all of the leading cellular handset manufacturers. The parent companies have also agreed on a future exit mechanism for NXP's ongoing 20 percent stake, which involves put and call options, exercisable beginning three years from the formation of the JV, at a strike price based on actual future financial results, with a 15 percent spread.
The new company will be incorporated in the Netherlands and headquartered in Switzerland with approximately 9,000 employees worldwide. These employees, almost equally contributed by ST and NXP, will be in position to serve the JV's large and demanding global customer base. Not owning any wafer fabs, the joint venture is designed with low capital intensity, while having access to secure leading-edge manufacturing capacity from both parent companies and foundries. It will operate its own assembly and test facilities in Calamba, Philippines and Muar, Malaysia. NXP's Calamba site as a whole will be transferred to the JV, as will part of ST's back-end operations in Muar, which will be separated from the parent company's existing facility in the area.
The new organization will combine key design, sales and marketing, and back-end manufacturing assets from both companies into a streamlined worldwide joint venture that will rely on its parent companies and foundries for wafer fabrication services. It will be well positioned with all of the vital technologies for Universal Mobile Telecommunication Systems; for the emerging 3G Chinese standard; as well as other cellular, multimedia and connectivity capabilities, including WiFi, Bluetooth, GPS, FM Radio, USB and UWB. The JV will also integrate the Silicon Laboratories' wireless and GloNav's GPS operations recently acquired by NXP.