STMicroelectronics Reports 2009 Second Quarter and First Half

STMicroelectronics Reports 2009 Second Quarter and First Half Financial Results

On a sequential basis, all market segments posted growth with Computer increasing by 36%, Automotive by 19%, Telecom by 14%, Industrial by 7% and Consumer by 1%. Distribution registered the strongest sequential improvement by 44% reflecting the better alignment of inventory to current demand levels and improving market conditions. In comparison to the year-ago quarter, performance was led by the 17% growth of Telecom driven by the NXP Wireless and ST-Ericsson wireless transactions. All other market segments decreased in the year-ago period with Computer down by 13%, Consumer by 33%, Industrial by 37%, and Automotive by 38%. Distribution decreased 36% reflecting a destocking of the channel and weak industry conditions.

Gross margin in the second quarter of 2009 was 26.1%, in-line with the first quarter of 2009 gross margin of 26.3%. As anticipated, ST's second quarter gross margin was at an extraordinary low level due to significant unused capacity charges, inefficiencies related to manufacturing operations and a negative mix impact driven by the market demand in certain geographies, in particular, China. In comparison to the year-ago period, lower manufacturing efficiencies, volumes and price more than offset the improved contribution of product mix, the positive effects from currency, licensing ST's technology and the inclusion of the wireless transactions.

In the 2009 second quarter, combined SG&A and R&D expenses were $896 million compared to $837 million in the prior quarter and $751 million in the year-ago quarter. As anticipated, combined SG&A and R&D expenses in the second quarter increased sequentially due to the integration of one additional month of the former Ericsson Mobile Platforms business into ST-Ericsson and a higher number of days in the second quarter, but were partially offset by ongoing cost reduction programs.

During the second quarter, the Company's cost realignment initiatives were focused on completing the phase-out of wafer manufacturing operations in Carrollton, Texas, the ongoing reduction in workforce programs and the announced cost reduction actions at ST-Ericsson. In conjunction with these efforts, ST posted second quarter restructuring and impairment charges of $86 million compared to $56 million and $185 million in the first quarter of 2009 and year-ago period, respectively.

Revenue and Operating Results by Product Segment

The following table provides a breakdown of revenues and operating results by product segment. Given the unusually high amount of unused capacity charges in the first and second quarters of 2009, the charges are reflected in the segment "Others" in the respective quarters.


                              Q2                  Q1                  Q2
    Operating       Q2       2009       Q1       2009       Q2       2008
    Segment        2009    Operating   2009   Operating    2008   Operating
    (In Million     Net      Income     Net     Income      Net     Income
     US$ and %)   Revenues   (Loss)  Revenues   (Loss)   Revenues   (Loss)
     ----------   --------   ------  --------   ------   --------   ------



    ACCI            722        (77)      627       (35)    1,101        35
                    ---        ---       ---       ---     -----        --
     IMS            595        (16)      499        12       865       132
                    ---        ---       ---        --       ---       ---

     Wireless (a)   650       (126)      518      (107)      410         0
                    ---      -----       ---     -----       ---         -

     Others (b)(c)   26       (209)       16      (263)       15      (193)
                     --      -----        --     -----        --     -----
     TOTAL        1,993       (428)    1,660      (393)    2,391       (26)
                  -----      -----     -----     -----     -----       ---

    (a) As of February 3, 2009, "Wireless" includes the portion of sales and
        operating results of the ST-Ericsson joint venture as consolidated in
        the Company's revenues and operating results, as well as other items
        affecting operating results related to the wireless business.
    (b) Net revenues of "Others" include revenues from sales of Subsystems,
        assembly services and other revenues.
    (c) Operating income (loss) of "Others" includes items such as unused
        capacity charges, impairment, restructuring charges, and other related
        closure costs, start-up costs, and other unallocated expenses such as:
        strategic or special research and development programs, certain
        corporate-level operating expenses, patent claims and litigations, and
        the other costs that are not allocated to product groups, as well as
        operating earnings or losses of the Subsystems and Other Products
        Group."Others" includes $121 million and $139 million of unused
        capacity charges in the 2009 second and first quarters, respectively,
        and $86 million, $56 million and $185 million of impairment and
        restructuring charges in the 2009 second and first quarters and
        year-ago period, respectively.

ACCI's (Automotive/Consumer/Computer/Communication Infrastructure Product Groups) second quarter net revenues increased 15% sequentially to $722 million. ACCI's second quarter operating loss was $77 million, compared to a loss of $35 million in the first quarter period.

IMS' (Industrial and Multisegment Product Sector) second quarter net revenues increased 19% on a sequential basis. IMS registered in the second quarter an operating loss of $16 million, compared to an operating profit of $12 million in the first quarter.

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