STMicro Reports Improving Financial Results

April 22, 2013 by Jeff Shepard

STMicroelectronics has reported net revenues totaled $2.01 billion and gross margin was 31.3% the quarter ending March 30, 2013. Net loss attributable to ST was $171 million, mainly due to the 50% share in ST-Ericsson operating loss and restructuring costs, and slightly lower than the net loss of $176 million in the year-earlier first quarter. First quarter gross profit was $628 million and gross margin was 31.3%. On a year-over-year basis, gross profit increased 5.4% and gross margin improved 170 basis points. On a sequential basis, gross margin declined 100 basis points and was in line with expectations, reflecting no revenues from licensing at ST-Ericsson and the usual negative price pressure we experience at the beginning of the year, offset in part by lower unsaturation charges.

“First quarter sales and gross margin results were in line with the mid-point of our guidance,” said ST President and CEO Carlo Bozotti. “Importantly, excluding ST-Ericsson, our businesses delivered revenues better than normal seasonality despite the ongoing soft macro-economic environment, due to the strong performance of Microcontrollers, Power and Smart Power for industrial and automotive. We also achieved key design wins with leading customers for 28nm FD-SOI technology products and home-gateway applications.

“We continued to maintain a strong net financial position in the quarter, while using some of our available cash to repay at maturity our outstanding 2013 Senior bonds. We have signed an agreement with Ericsson to split up the ST-Ericsson joint venture. We have also begun to advance towards our first quarter 2014 net operating expense goal, significantly reducing operating costs in the quarter.”

ST’s first quarter revenues, excluding the Wireless product line, increased 1.3% year-over-year, and decreased 3.4% on a sequential basis, reflecting better than normal seasonality. Overall, net revenues decreased 0.4% and 7.1% on a year-over-year and sequential basis, respectively.

EMEA led all regions with 0.2% sequential revenue growth while the Americas decreased by 3.3% and Japan & Korea were lower by 5.1%. Greater China & South Asia revenues decreased 13.2% driven by business dynamics at certain key global accounts.

R&D expenses were $533 million and declined by 16% on a year over year basis period. On a sequential basis, R&D expenses decreased $52 million or 9% compared to the prior quarter, benefiting principally from the ongoing restructuring initiatives at ST-Ericsson as well as, starting March 2, 2013, the charge back to Ericsson of the LTE Modem expenses of $29 million.

SG&A expenses totaled $279 million in the first quarter, a reduction of 10% compared to the year-ago period mainly due to cost reduction initiatives. On a sequential basis, SG&A expenses decreased by 4% mainly due to seasonality.

Impairment, restructuring and other related closure costs for the first quarter were $101 million, of which $87 million were related to ST-Ericsson. Furthermore, ST recorded a charge of $8 million as loss on equity-method investments related to ST-Ericsson JVD, which is accounted for under the equity-method, primarily due to additional restructuring charges.

Operating margin before impairment, restructuring and one-time items attributable to ST was a negative 5.3% in the 2013 first quarter compared to negative 3.3% in the prior quarter.

In the first quarter of 2013, net loss attributable to non-controlling interest was $126 million, which mainly included the 50% owned by Ericsson in the ST-Ericsson joint venture, as consolidated by ST. In the fourth quarter of 2012, the corresponding amount was $361 million.

First quarter net loss was $171 million or $(0.19) per share, compared to a net loss of $(0.48) and $(0.20) per share in the prior and year-ago quarters, respectively. On an adjusted basis, net of related taxes, ST reported non-U.S. GAAP net loss per share of $(0.13) in the first quarter, excluding impairment and restructuring charges and one-time items, compared to a net loss of $(0.11) and $(0.14) per share in the prior and year-ago quarters, respectively.