UPDATE 1-ST-Ericsson parents say working with advisor on strategy

(Recasts with details, share price, analysis)

By Olof Swahnberg STOCKHOLM, Oct 9 (Reuters) - ST-Ericsson's owners Ericsson

and STMicroelectronics have brought in anadvisor on strategy for chip joint venture ST-Ericsson butanalysts said a sale of the loss-making unit would be hard.

ST-Ericsson made an operating loss of $235 million in thesecond quarter as it continued to suffer from the collapse indemand for phones from clients Nokia and SonyEricsson and a strategic shift to supplying chips forsmartphones rather than older feature phones.

For the full year 2011, the company made a loss of $841million on sales of $1.65 billion and it has lost around $2billion in its three years of operation.

"The two parent companies, together with ST-Ericsson, arecurrently working with an external advisor in order to ensurethe best possible future for ST-Ericsson," the two companiessaid in a statement.

A sale or break-up of the firm was not mentioned in therelease, but Ericsson's head of media relations said all optionswere being looked at.

Analysts, however, said the business would find few buyersshould either or both parents wish to sell.

"The possibilities for Ericsson are limited except to holdon to its share and try and do the turnaround themselves," saidMirko Maier, analyst at LBBW.

Ericsson and STMicroelectronics said they supportedST-Ericsson in its ongoing cost-cutting programme which aims tolower the level of sales the company needs to break even.

The comments follow media reports that STM and Ericsson hadengaged U.S. investment bank JP Morgan to review all strategicoptions, including the search for a new partner or the sale ofsome assets.

Les Echos said one scenario would see the venture sold inblocks related to specific technologies such as connectivity,power management and software architecture.

Other pieces of the business could be shifted back into theparent companies, the paper said.

No decision has yet been taken, but the companies are aimingto make one between now and the end of the year, according tothe paper, which did not cite its sources.

Ericsson shares were down 0.25 percent at 59.55 crowns 1139GMT, roughly in line with the DJ Stoxx 600 technology index.STMicro shares were up 4.75 percent at 4.52 euros.

(Additional reporting by Christian Plumb in Paris and SimonJohnson in Stockholm)

((simon.c.johnson@thomsonreuters.com)(+46 8 700 1045)(ReutersMessaging: simon.c.johnson.reuters.com@reuters.net))

Keywords: ERICSSON/