Mr. Bozotti stated, "Macro trends remain uncertain but excluding ST-Ericsson, we have seen a progressive improvement in bookings in the second quarter, although, towards the end of the second quarter, we experienced a softening in the smartphone market also impacting ST products.
"We continue to expect the ramp of key products in MEMS, Automotive, Microcontrollers and Imaging in the second half of this year, leading to higher sequential revenue results for both the third and fourth quarters of this year.

"In combination, we expect third quarter net revenues, excluding Wireless product line, to increase about 3.5% at the midpoint. Including Wireless product line, we expect overall revenues to be about flat sequentially at the midpoint of our guidance. We again expect significant reductions in operating expenses in the third quarter and we are well aligned to achieve our net operating expenses target range of $600 million to $650 million in the first quarter of 2014. Furthermore, with the closing of the ST-Ericsson transaction in early August, the remaining ST-Ericsson activities will be deconsolidated.

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* Adjusted net earnings per share is a non-US GAAP measure. For additional information and reconciliation to U.S. GAAP, please refer to Attachment A.

"As we look ahead, we anticipate progressive improvement in our gross margin. First, with fab utilization at a more stable and optimal level we plan to continue to grow our business in our targeted growth drivers. Second, we are focused on better utilizing and optimizing our technology portfolio. Third, we are now in a position to more aggressively manage our product mix in order to prune lower margin products from our portfolio. To successfully achieve this, we will make gradual structural changes to our manufacturing footprint to ensure that it matches our needs, complemented by our foundry sourcing. As a result, we plan to gradually expand 8-inch capacity while winding down certain 6-inch manufacturing lines in Singapore and Catania, Italy and consolidate our back-end activities in China to Shenzhen."

"Finally, to support our proprietary R&D activities for CMOS derivative technology investments, we recently signed an important frame agreement with the French Government for the 'Nano2017' program."

The Company expects third quarter 2013 revenues to be about flat on a sequential basis, plus or minus 3.5 percentage points. Gross margin in the third quarter is expected to be about 33.5%, plus or minus 2.0 percentage points.

This outlook is based on an assumed effective currency exchange rate of approximately $1.30 = EUR 1.00 for the 2013 third quarter and includes the impact of existing hedging contracts. The third quarter will close on September 28, 2013.

Recent Corporate Developments

On April 22, ST announced the appointment of Martine Verluyten as Chair of the Audit Committee of the ST Supervisory Board, succeeding Tom de Waard. Verluyten has been a member of the ST Supervisory Board and has served on its Audit Committee since May 2012.

On May 22, the Company announced that Executive Vice President Jean-Marc Chery had been appointed General Manager of the Embedded Processing Solutions Segment, a new position, and Vice-Chairman of the Corporate Strategic Committee where he has been a Member since 2008. Chery continues to lead the Packaging and Test Manufacturing and Quality functions for ST.

On May 28, ST announced that ST-Ericsson, a 50-50 joint venture with Ericsson that the parent Companies are winding down, had sold the assets and intellectual property rights (IPR) associated with its mobile connectivity Global Navigation Satellite System (GNSS) to a leading semiconductor company.

On June 17, ST announced that it had signed a comprehensive agreement with Rambus Inc. expanding existing licenses between the two Companies, settling all outstanding claims, and committing both organizations to explore additional opportunities for collaboration. The multifaceted agreement gives Rambus access to ST's Fully-Depleted Silicon On Insulator (FD-SOI) process-technology design environment while giving ST secured license terms from the Cryptography Research, Inc. (CRI) division of Rambus that makes it possible for ST to expand deployment of security technology for banking, identity, PayTV, video gaming, smartphones, and government, across a wider range of products.

On June 21, ST announced that all the resolutions proposed by the Supervisory Board were approved at the Company's Annual General Meeting (AGM), which was held in Amsterdam.

The main resolutions approved by the shareholders were:

• The adoption of the Company's 2012 Statutory Annual Accounts prepared in accordance with International Financial Reporting Standards (IFRS);
• The distribution, in line with the Dividend Policy of the Company, of a semi-annual cash dividend per common share of US$0.10 in the second quarter of 2013 and US$0.10 in the third quarter of 2013, to be paid in June and September of 2013, respectively, to shareholders of record in the month of each quarterly payment;
• The appointment of Ms. Janet Davidson as a new member of the Supervisory Board for a three-year term, expiring at the 2016 AGM, as a replacement for Mr. Raymond Bingham, whose mandate has expired;
• The reappointment of Mr. Alessandro Ovi as member of the Supervisory Board for a three-year term, expiring at the 2016 AGM;
• The amendment of the compensation scheme of the Supervisory Board;
• The approval of a new four-year Unvested Stock Award Plan for Management and Key Employees.

On May 21, ST announced its leadership of Places2Be, a 3-year, EUR 360M advanced-technology pilot-line project with the participation of 18 other leading European companies and academic institutions to support the industrialization of Fully-Depleted Silicon-On-Insulator (FD-SOI) microelectronics technology. Places2Be ("Pilot Lines for Advanced CMOS Enhanced by SOI in 2x nodes, Built in Europe") aims to support the deployment of an FD-SOI pilot line at 28nm and the subsequent node, as well as a dual source that will enable volume manufacturing in Europe. Places2Be will drive the creation of a European microelectronics design ecosystem using this FD-SOI platform and explore the path towards the next step for this technology (14/10nm).

Q2 2013 - Product and Technology Highlights

During the quarter, ST made strong progress with important new-product introductions and significant design wins.

Sense & Power and Automotive Products (SPA)

Analog, MEMS and Sensors (AMS)

• Deployment of the SPIRIT1, sub-GHz RF transceiver-based application for remote control of street lights has begun along the river Seine in Paris.
• Earned design-ins for Pulser IC in portable ultrasound imaging equipment.
• Passed security certification by NDS for ST8034 smart-card interface, a necessary step in the expansion of ST's smart-card presence in the set-top box market.
• Captured a major socket in a 1st-tier customer in the glucose-metering market with a dedicated op amp, reinforcing our best-in-class capabilities and positioning in the analog segment.
• Collected a win for a high-end digital top-port microphone in a new tablet to be launched this fall.
• Achieved milestone shipment rate of 10Munits/quarter for Fuel-Gauge battery-monitor IC.
• Ramping production of 6-axis accelerometer and gyroscope for a high-profile launch by a major phone manufacturer.
• Achieved significant qualifications for 6-axis accelerometer and gyroscope and 6-axis accelerometer and compass for important phone manufacturers.
• In production with 9-axis inertial module for several innovative navigation-related applications from top-tier Americas manufacturers.

Industrial and Power Discretes (IPD)

• Building momentum for MOSFETs with a qualification from a top switched-mode power supply (SMPS) maker and captured design wins with important leaders for lighting and charger applications in China and South Asia.
• Achieved big wins for IGBTs (Insulated Gate Bipolar Transistors) with a large Asian welding customer and with Intelligent Power Modules for air-conditioning and motor-control applications.
• Earned design wins in several server SMPS platforms with ViperPlus high-voltage converters from a major Taiwanese SMPS manufacturer.
• Gaining market traction with the innovative digital-power STLUX385x platform for various projects with wins in major EMEA lighting customers.
• Captured design wins from major German factory automation customers with newest octal intelligent power switch.
• Earned wins for RF antenna-tuner solution for smartphones from a leading Taiwanese OEM.
• Won new socket for the new field-effect rectifier diodes for mobile and tablet chargers at a leading Asian OEM.

Automotive (APG)

• Earned an important award for a microcontroller companion chip that integrates all key functions for stability-control systems for the Korean market from a leading Korean supplier.
• Captured a design win from a global leader in the braking market for a fully integrated electronic parking-brake solution.
• Reinforced leadership in Infotainment with the awarding of a multi-standard digital terrestrial tuner from a leading European Tier 1.
• Won several awards for VIPower smart-power technology in Body Control Modules from leading global Tier 1s and earned a socket from another leading European Tier 1 for our 32-bit automotive microcontrollers for an airbag application.