UPDATE 3-STMicro defends group's unity after breakup report

* STMicro spokesman declines to make further comment

* STMicro has said to unveil new strategic plan in December

* Shares pare gains after jumping 19 pct

(Adds background, analyst comment, updates shares)

By James Regan and Tarmo Virki

PARIS, Oct 12 (Reuters) - STMicroelectronics said it was not planning to split itself up contrary to a report that Europe's top semiconductor maker was considering a breakup, which sent its shares up by nearly a fifth.

Bloomberg reported earlier that STMicro could split up its analog and digital businesses, as well as selling its struggling mobile-phone chip venture with Ericsson , although no decision had been made.

STMicroelectronics is looking at options for the loss-making ST-Ericsson venture.

Samsung Electronics could buy STMicro's digital assets along with ST-Ericsson, enabling STMicro to focus on its semiconductors business, the news agency said.

"STMicroelectronics denies the existence of initiatives which can compromise the unity of the company," STMicro said in a brief statement. An STMicro spokesman declined to elaborate on the statement.

Samsung said the "rumours are groundless", according to Bloomberg. Samsung Europe was not immediately reachable for comment.

The group is preparing to unveil a strategic plan in December to address softer demand and the changing needs of its customers.

On Tuesday, STMicro and Ericsson said they had hired an adviser to review strategic options for ST-Ericsson. They did not mention a sale or breakup of the firm, but Ericsson's head of media relations said all options were being looked at.

A source familiar with the situation identified the advisor chosen for the ST-Ericsson strategic review as JPMorgan.

Shares in STMicro, which rose as much as 19 percent after the Bloomberg report, pared gains after the company statement to close 6.4 percent higher at 4.673 euros in Paris, leaving the company with a market capitalisation of 4.1 billion.

The U.S.-listed shares were up 7.8 percent at $6.08 at 1557 GMT.

JPMorgan analyst Sandeep Deshpande said the shares had risen on hopes of splitting the analog and digital businesses as the former were funding losses at the latter.

"If the two assets were separated, then the analog assets would find a much higher value due to their profitability," Deshpande said.

"The investor hope is that a trade buyer would then fund the losses associated with the digital assets and they would not be borne by STMicro investors."


STMicro makes chips for everything from TVs and PCs to printers, smartphones, hybrid electric vehicles and medical imaging devices.

The group said last month it would reveal in December a plan to speed up its adoption of a new financial model, "taking into account the changed market environment and some specific customer dynamics".

STMicro, which competes with Analog Devices Inc and Texas Instruments Inc , had said in July that the global economic environment had weakened.

The ST-Ericsson joint-venture made an operating loss of $235 million in the second quarter as it continued to suffer from the collapse in demand for phones from clients Nokia and Sony Mobile and a shift to supplying chips for smartphones rather than older feature phones.

The joint-venture lost $841 million on sales of $1.65 billion last year and has lost about $2 billion in its three years of operation.

"Any move that would shed ST of ST-Ericsson would be the right one, in our opinion, as the money-losing venture continues to weigh on ST's overall profitability," Morningstar analyst Brian Colello said in a research note, adding that he was keeping his "fair value" estimate of 5 euros a share.

STMicro, which is 27.5 percent held indirectly by France and Italy, has about 50,000 staff worldwide and posted 2011 sales of $9.73 billion including ST-Ericsson.

($1 = 0.7726 euros)

(Additional reporting by Blandine Henault and Blaise Robinson in Paris, Valentina Caiazzo; in Milan and Sophie Sassard in London; Editing by David Holmes and Jane Merriman)

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