STMicro Sense & Power and Automotive Sales up 5.7%

April 27, 2014 by Jeff Shepard

STMicroelectronics NV reported financial results for the first quarter ended March 29, 2014. First quarter net revenues totaled $1.83 billion, gross margin was 32.8%, and net loss was $0.03 per share. ST's first quarter revenues, excluding legacy ST-Ericsson products, grew 0.7% on a year-over-year basis and decreased 6.4% sequentially. First quarter total revenues, including legacy ST-Ericsson products, decreased year-over-year and sequentially by 9.2% and 9.4%, respectively.

“First quarter revenue and gross margin results were well aligned with our guidance,” commented ST President and CEO Carlo Bozotti. “The combination of a positive macro-economic environment and our leading-edge product portfolio helped to drive higher year-over-year revenues in Microcontrollers, Automotive, Industrial and Power, as well as in the Distribution channel. Our general-purpose microcontroller business enjoyed the fourth consecutive quarter of record revenues and today, ST is the second largest player worldwide in microcontrollers, including both general-purpose and secure.*

“During the first quarter, ST posted an operating profit before impairment and restructuring charges of $8 million, improving by $188 million year-over-year, driven by the exit from ST-Ericsson as well as operating expenses well in line with our financial model. Additionally, our strong and growing product momentum in our Sense & Power and Automotive segment translated into an operating margin improvement of 360 basis points in this segment compared to the year-ago quarter.

Sense & Power and Automotive Products (SP&A) first quarter net revenues increased 5.7% compared to the year-ago quarter driven by APG and IPD. SP&A revenues decreased 3.5% sequentially. SP&A operating margin improved to 8.7% in the 2014 first quarter compared to 5.1% in year-ago quarter reflecting leverage on revenue growth, product innovation and manufacturing performance. SP&A operating margin in the prior quarter was 7.7%.

First quarter gross profit was $599 million and gross margin was 32.8%. Gross margin improved 150 basis points year-over-year, benefiting from the one-time licensing payment, manufacturing efficiencies and lower unsaturation charges partially offset by price pressure. Gross margin decreased 10 basis points sequentially due to usual price pressure and manufacturing inefficiencies partially offset by product mix and the one-time licensing payment.

Combined R&D and SG&A expenses decreased 25.4% to $606 million compared to $812 million in the year-ago quarter mainly due to the exit from ST-Ericsson and ongoing cost reduction activities and on a sequential basis decreased 7.8% benefiting from ongoing cost reduction initiatives and a lower number of days in the quarter. R&D expenses in the first quarter were $378 million decreasing by 29.1% and 7.2% on a year-over-year and sequential basis, respectively. SG&A expenses totaled $228 million in the first quarter, a reduction of 18.4% and 8.8% compared to the year-ago and prior quarter, respectively.

First quarter other income & expenses, net, registered income of $15 million mainly benefiting from the sale of assets totaling $13 million and $21 million of R&D grants. These R&D grants do not include the Nano2017 R&D grants, pending European Union approval now expected in the second quarter of 2014.

First quarter operating income and operating margin before impairment and restructuring charges improved to $8 million and 0.4%, respectively, compared to a loss of $180 million or negative 8.9% in the year-ago quarter principally due to the exit from ST-Ericsson and ongoing cost reduction activities. Impairment and restructuring charges were significantly reduced in the first quarter at $12 million compared to $101 million in the year-ago quarter and $29 million in the prior quarter.

First quarter net loss attributable to parent company was $24 million or $(0.03) per share, compared to a net loss per share of $(0.19) and $(0.04) in the year-ago and prior quarter, respectively. On an adjusted basis, ST’s non-U.S. GAAP net loss per share was $(0.01) in the first quarter compared to a net loss per share of $(0.13) and $(0.01) in the year-ago and prior quarter, respectively.

Looking forward, Mr. Bozotti stated, “In the second quarter, we expect overall revenues to increase sequentially by about 2% at the midpoint. As anticipated, ST-Ericsson’s legacy products are winding down and revenues are expected to be less than half of the $63 million recorded in the first quarter.

“We are encouraged by the signs of improvement in the macro-economic environment generally and by specific product dynamics expected in the next several quarters. In the second quarter, we see opportunities to continue to expand our customer base, driven by strength in microcontrollers, automotive and industrial, and power applications and by the initial recovery of the Embedded Processing Solutions segment.

“In addition, we see opportunities to further advance ST’s leadership in key embedded processing solutions and technologies with the approval of the Nano2017 R&D program, now expected this quarter.

“Finally, based upon our financial position, performance and market outlook, the Supervisory Board is recommending to shareholders the approval of a $0.10 per share cash dividend for the second and third quarters of this year, stable with prior periods and in line with our intention to continue to return value to shareholders.”