STMicroelectronics (NYSE:STM) may be split and its digital business sold, Shares Up 7%

STMicroelectronics N.V. (ADR)(NYSE:STM) may be split up and its mobile-phone chip business put up for sale, Bloomberg reported on Friday citing sources.

The report said that the company, which is Europe's largest semiconductor maker, is considering  splitting its analog business, which makes chips and sensors used in products from cars to video-game consoles, from its digital assets, which focus on semiconductors used in set-top boxes, televisions and handsets.

Shares in the company rose 7 percent to $6.03, off session high of $6.31.

The report said that an announcement could be made by the end of the year, though no decision has been made yet and there are ample chances of the company retaining its current structure.

Its digital business has been a drag on the company's financials. It has been hit by a decline in the fortunes of its key customers such as Nokia, Research in Motion and Alcatel Lucent.

By splitting the Geneva-based company, Chief Executive Officer Carlo Bozotti could focus on developing the more promising analog business, mimicking German rival Infineon Technologies AG, the report said.

In a statement, STMicroelectronics said it denies “the existence of initiatives which can compromise the unity of the company.” The chipmaker said it plans to announce third-quarter earnings on Oct. 23 as planned, Bloomberg reported.

One potential hurdle to a split of STMicroelectronics is its ownership structure. France and Italy’s governments together control about 27.5 percent of the company. Any reorganization has to be carefully structured to allay concerns about possible job cuts in those countries, it added.