STMicroelectronics reported financial results for the first quarter ended March 31, 2012. First quarter net revenues decreased 8% to $2.02 billion on a sequential basis, while gross margin was 29.6%, absorbing anticipated unsaturation charges related to fab loading and a one-time unexpected charge resulting from an arbitration award.
President and CEO Carlo Bozotticommented, "ST’s wholly-owned businesses in the first quarter posted a sequential decrease of 3%, better than historical seasonality, benefiting from growth in the Automotive segment and the Analog, MEMS and Microcontrollers sector.
"Our Wireless segment losses weighed heavily on our quarterly results again. However, ST-Ericsson has announced today its new strategic direction and renewed business model with a key objective to significantly reduce its operating losses throughout 2012 as it moves towards leadership and improved financial returns.
"In total, first quarter activity levels across ST’s product portfolio tracked closely to our expectations, with net revenues near the mid-point of our business outlook. Similarly, gross margin evolution was consistent with our continued focus on inventory management and in the first quarter gross margin absorbed approximately 600 basis points of unsaturation charges and a one-time unexpected charge resulting from an arbitration award. The effort on inventory reduction and prudent capital management led to a quarter on quarter increase in free cash flow and a further improvement in ST’s financial position which stood at $1.27 billion."
ST’s first quarter net revenues decreased 8.0% on a sequential basis, within our guidance, with ST’s wholly-owned businesses posting a sequential decrease of 3%, better than historical seasonality, while the Wireless product segment was lower by 29%. EMEA led all regions with 8.9% sequential growth while the Americas decreased by 4.5%, Japan & Korea down by 8.8% and Greater China & South Asia down by 16.7%.
Gross margin in the first quarter was 32.2%, excluding a one-time 260 basis point impact due to the charge on ST’s cost of sales following an award from an arbitration tribunal ordering ST to pay approximately $59 million to NXP Semiconductors as announced on April 9, 2012. The first quarter gross margin was negatively impacted by an unsaturation charge of $71 million driven by inventory reduction and a severe deterioration of manufacturing performance due to a low level of loading and less favorable than expected product mix.
Combined SG&A and R&D expenses were $943 million compared to $894 million in the prior quarter mainly due to seasonality and reduced activity in the prior quarter. Combined operating expenses, as a percentage of sales, were 46.8% in the 2012 first quarter compared to 40.8% in the prior quarter.
Mainly due to increased losses at ST-Ericsson and excluding the one-time impact of the arbitration award, operating margin before impairment, restructuring and one-time items attributable to ST was negative 6.5% in the 2012 first quarter compared to about break-even in the prior quarter.
In the first quarter of 2012, ST booked $159 million as a result attributable to non-controlling interests, which mainly included the 50% owned by Ericsson in the ST-Ericsson joint venture, as consolidated by ST. In the fourth quarter of 2011, the corresponding amount was $199 million.
First quarter net loss was $176 million or $(0.20) per share, compared to net loss of $(0.01) and net income of $0.19 per diluted 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 $(0.14), excluding impairment and restructuring charges and the one-time impact of the arbitration award, in the first quarter, compared to net loss of $(0.01) and net income of $0.20 per diluted share in the prior and year-ago quarters, respectively.
