STMicroelectronics Reports 3Q 2013, Nine Month Financial Results

STMicroelectronics reported financial results for the third quarter and nine months ending Sept. 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.

“Our financial performance during the third quarter was mixed,” said Carlo Bozotti, ST president and CEO. “On one hand, we saw overall year-over-year revenue improvement of 3.9% 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 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,” Bozotti noted. “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,”

On Aug. 2, 2013, ST and Ericsson completed in a timely manner, with lower exit costs than anticipated and with a minimized social impact, the transaction to transfer the activities of ST-Ericsson to the respective parent companies. With this, approximately 1,000 employees have joined ST. ST has taken on the existing ST-Ericsson products, other than LTE multimode thin modems and the GNSS (Global Navigation Satellite System) connectivity solution sold to a third party, and related business as well as certain assembly and test facilities.

Third Quarter Review

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%.

Nine Months 2013 Results

Net revenues decreased 4.2% to $6.07 billion from $6.33 billion in the year-ago period, mainly reflecting lower Wireless product line sales. Net revenues for the first nine months of 2013, excluding the Wireless product line, increased 3.0% to $5.50 billion. Gross margin was 32.2% of net revenues, compared to 32.9% of net revenues for the first nine months of 2012. Net loss, as reported, was $464 million in the first nine months of 2013, or $(0.52) per share, compared to a net loss of $730 million, or $(0.82) per share in the first nine months of 2012.

“In the third quarter we began to experience a softening of bookings with the exception of automotive.” Bozotti stated. “We believe this is a reflection of a demand correction in the semiconductor industry. For the fourth quarter, we anticipate a relatively flat sequential revenue performance. Nevertheless, we anticipate seeing a return to positive cash flow generation as a result of the wind-down of ST-Ericsson.

“We are confident in our ability to turn our significant business opportunities into revenue,” Bozotti added. “Our innovative products and technologies in MEMS and Sensors, Smart Power, Automotive, Microcontrollers and Set-top box/Home Gateway, are gaining greater traction with customers and will enable us to further expand our customer base.

“We continue to aggressively pursue our objective to reach an operating margin of about 10%,” Bozotti reported. “Our initiatives to reduce costs, such as achieving our net operating expenses target, and improving our manufacturing, are on track. However, the timing for us to achieve our operating margin target will depend greatly on our level of revenues. Based on current visibility including market conditions, reaching this operating margin target is now expected in mid-2015, about six months later than originally expected.”

The company expects fourth quarter 2013 revenues to be about flat on a sequential basis, plus or minus 3.5 percentage points. Gross margin in the fourth quarter is expected to be about 33.0%, plus or minus 2.0 percentage points.