STMicro Reports Mixed Financial Results

October 21, 2013 by Jeff Shepard

STMicroelectronics NV reported financial results for the third quarter and nine months ending September 28, 2013. Third quarter net revenues totaled $2,013 million and gross margin was 32.4%. ST’s third quarter net loss was $142 million as the Company took a charge of $120 million, mostly non-cash, in connection with its annual third quarter impairment review and already announced restructuring initiatives. Overall, net revenues decreased 1.6% sequentially and 7.1% on a year-over-year basis. On a sequential basis by region of origin, the Americas and Japan & Korea posted growth of 4.0% and 3.7%, respectively, while EMEA and Greater China & South Asia decreased by 3.6% and 9.0%, respectively.

ST’s third quarter revenues, excluding the Wireless product line, increased 0.5% and 3.9% on a sequential and year-over-year basis, respectively. Sequential and year-over-year growth was driven by Imaging, Microcontrollers, MEMS and Automotive. Third quarter gross profit was $652 million and gross margin was 32.4%. On a sequential basis, gross margin declined 40 basis points, below the mid-point of our third quarter guidance range primarily due to the higher than expected weight of wireless legacy products, as well as negative currency effects. Third quarter net loss was $142 million or $(0.16) per share, compared to a net loss of $(0.17) and $(0.54) per share in the prior and year-ago quarter, respectively.

Sense & Power and Automotive Products (SP&A) third quarter net revenues decreased 0.4% sequentially, due to lower volumes in Industrial and Power products partially offset by slight growth in AMS and APG. SP&A revenues increased 2.6% compared to the year-ago quarter driven by APG. SP&A operating margin was 6.2% in the 2013 third quarter compared to 3.5% and 9.7% in the prior and year-ago quarter, respectively, with the sequential increase principally driven by lower operating expenses.

Embedded Processing Solutions (EPS) third quarter net revenues decreased 2.7% and 18.2% on a sequential and year-over-year basis, respectively, due to a significant decrease in WPS sales and to a lesser extent, overall lower DCG sales despite the strong growth in IBP and MMS. EPS segment operating margin improved to negative 2.2% in the 2013 third quarter, from negative 12.8% and negative 17.8% in the prior and year-ago quarter, respectively, mainly due to a significant reduction in expenses and a $75 million gain from the sale of businesses.

“Our financial performance during the third quarter was mixed. On one hand, we saw overall year-over-year revenue improvement of 3.9 percent across our business outside of the Wireless product line. We believe this exceeds the year-over-year revenue performance of our served market. On the other hand, this growth was milder than expected due to a muted order pattern during the quarter driven by softness in high-end smartphones in Asia and the mass market in Asia, including the cable set-top box market in certain countries,” said ST President and CEO Carlo Bozotti.

“However, we did see sequential growth in Imaging, Microcontrollers, MEMS, and Automotive. In particular, Microcontrollers posted record quarterly billings led by our general-purpose products. During the third quarter the Company posted an operating profit before impairment and restructuring charges. ST’s operating income excluding these charges was $54 million, improving by $118 million on a sequential basis. This is due in large part to the sale of ST-Ericsson’s Global Navigation Satellite System business along with lower operating expenses. In August, we completed the transaction to split up ST-Ericsson in a timely manner. With this we are strengthening our product development in key areas where we see important customer expansion opportunities including embedded processing, RF, analog and power,” Bozotti concluded.