News

ST Micro Reports Progress with Smart Driving & IoT Strategy

April 27, 2016 by Jeff Shepard

STMicroelectronicsreported financial results for the first quarter ended April 2, 2016, including net revenues of $1.61 billion and gross margin of 33.4%. First quarter automotive and microcontroller revenues grew year-over-year, well-supporting the company's new IoT strategic focus.

In the first quarter of 2016, ST realigned its product families into three product groups to better leverage the product synergies around its strategic focus on Smart Driving and Internet of Things applications: Automotive and Discrete Group (ADG); Analog and MEMS Group (AMG) and Microcontrollers and Digital ICs Group (MDG). MDG includes ST’s set-top-box business which is currently undergoing a restructuring targeting annualized savings of $170 million upon completion.

“ST’s results were in line with expectations and better than normal seasonality, despite a volatile macro-economic scenario and mixed industry dynamics as we entered the first quarter,” commented Carlo Bozotti, STMicroelectronics President and Chief Executive Officer.

“While revenues declined sequentially by 3.3% in the first quarter, we are focused on returning to year-over-year growth. We already started, in the first quarter, with two important product areas, representing about 50% of ST revenues in 2015: automotive, driven by our pervasiveness in all domains, and microcontrollers, driven by the STM32 family. Both businesses are at the heart of our strategy, focused on Smart Driving and on Internet of Things for industrial, home, city and consumer applications. These early results show that the strategic choices we have made are already bringing results.”

First quarter net revenues decreased 3.3% sequentially, in line with the Company’s expectations and reflecting seasonal factors overall. Automotive and Discrete Group (ADG) revenues, representing the largest product group of ST, increased 5.4% on a sequential basis driven by strong demand, especially in Europe, in automotive products partially offset by difficult market conditions and seasonality related to discrete products. Analog and MEMS Group (AMG) revenues were substantially flat on a sequential basis while Microcontrollers and Digital ICs Group (MDG), moving from a strong base of comparison in the prior quarter, decreased 13.4%.

On a year-over-year basis, first quarter net revenues decreased 5.4% or 3.3% excluding negative currency effects and certain businesses undergoing a phase-out including mobile legacy products, camera modules and set-top box. This mainly reflected weaker market conditions. However, certain product families saw an increase in revenues. Automotive and microcontroller revenues, excluding negative currency effects, both increased over 4.0%.

As of the first quarter of 2016, ST has three regional sales organizations: EMEA; Americas; and Asia Pacific. Asia Pacific was created from the merger of the Japan & Korea and Greater China-South Asia regional sales organizations. On a year-over-year basis, EMEA grew 3.0%, while the Americas and Asia Pacific decreased by 8.0% and 8.6%, respectively.

First quarter gross profit was $538 million and gross margin was 33.4%, including a negative impact of about 60 basis points from unused capacity charges. Gross margin improved 20 basis points year-over-year, benefiting from favorable currency effects, net of hedging, lower unused capacity charges and manufacturing efficiencies partially offset by price pressure. Gross margin decreased 10 basis points sequentially due to manufacturing efficiencies and price pressure partially offset by lower unused capacity charges, favorable product mix and favorable currency effects, net of hedging.

First quarter operating loss before impairment and restructuring charges was $5 million, equivalent to negative 0.3% of revenues, compared to income of $10 million, equivalent to positive 0.6% of revenues, in the year-ago quarter, reflecting lower revenues and pricing pressure, partially offset by favorable currency effects, net of hedging, improved product mix and manufacturing efficiencies. On a year-over-year basis, ADG and MDG operating results improved while AMG registered lower profitability mainly due to lower revenues.

Impairment and restructuring charges in the first quarter were $28 million principally relating to the initial phase of the Set-top Box restructuring plan. First quarter net loss was $41 million, equivalent to negative $0.05 per share, compared to a net loss of $22 million in the year-ago quarter and a net income of $2 million in the prior quarter.