ST's revenues of $1,993 million, up 20pc sequentially

SINGAPORE: STMicroelectronics (reported financial results for the 2009 second quarter and first half ended June 27, 2009.

“ST’s second quarter results reflect solid progress across several key fronts,” said President and CEO Carlo Bozotti.

He added: “Revenue results of $1.99 billion for the second quarter came in above the high end of our internal planning target range of $1.73 to $1.93 billion, principally driven by stronger-than-expected performance across most market segments including Computer, Automotive, Telecom and Industrial and in China and Asia-Pacific.
Bookings steadily increased through the second quarter despite a still uncertain environment.

"Our strong actions on fab loading to reduce inventory levels have led to a reduction in inventories of almost $400 million in just six months, accelerating inventory turns sequentially to 4.1 turns from 2.9 turns. As expected, these actions have driven our second quarter gross margin to an extraordinary low level.

"It is clear that the global recession has negatively impacted our financial results in the first half of 2009, but it has not slowed our efforts to develop leading-edge products.

"In the second quarter our pace of innovation continued as we brought to the market many next-generation products including analog controllers and power MOSFETs for power management in computer motherboards, high-voltage MDMesh power MOSFETs for switched-mode power supplies, MEMS gyroscopes, and advanced GPS solutions. Additionally, we ramped-up 55nm technology in ICs for set-top-boxes and, in wireless, we shipped in volume TD-SCDMA devices.”

Q2 review
ST’s net revenues for the second quarter of 2009 total $1,993 million and include the complete integration of the former Ericsson Mobile Platforms business into ST-Ericsson and $18 million from the licensing of technology.

Net revenues increased 20 percent sequentially reflecting an increase in demand across ST’s served market segments, as well as in all regions, with particular strength in China and Asia Pacific. Net revenues declined in comparison to the year-ago quarter in all market segments except Telecom, and in all regions except Asia Pacific, due to business conditions.

On a sequential basis, all market segments posted growth with Computer increasing by 36 percent, Automotive by 19 percent, Telecom by 14 percent, Industrial by 7 percent and Consumer by 1 percent.

Distribution registered the strongest sequential improvement by 44 percent reflecting the better alignment of inventory to current demand levels and improving market conditions. In comparison to the year-ago quarter, performance was led by the 17 percent growth of Telecom driven by the NXP Wireless and ST-Ericsson wireless transactions.

All other market segments decreased in the year-ago period with Computer down by 13 percent, Consumer by 33 percent, Industrial by 37 percent, and Automotive by 38 percent. Distribution decreased 36 percent reflecting a destocking of the channel and weak industry conditions.

Gross margin in the second quarter of 2009 was 26.1 percent, in-line with the first quarter of 2009 gross margin of 26.3%. As anticipated, ST’s second quarter gross margin was at an extraordinary low level due to significant unused capacity charges, inefficiencies related to manufacturing operations and a negative mix impact driven by the market demand in certain geographies, in particular, China.

In comparison to the year-ago period, lower manufacturing efficiencies, volumes and price more than offset the improved contribution of product mix, the positive effects from currency, licensing ST’s technology and the inclusion of the wireless transactions.

In the 2009 second quarter, combined SG&A and R&D expenses were $896 million compared to $837 million in the prior quarter and $751 million in the year-ago quarter.

As anticipated, combined SG&A and R&D expenses in the second quarter increased sequentially due to the integration of one additional month of the former Ericsson Mobile Platforms business into ST-Ericsson and a higher number of days in the second quarter, but were partially offset by ongoing cost reduction programs.

During the second quarter, the Company’s cost realignment initiatives were focused on completing the phase-out of wafer manufacturing operations in Carrollton, Texas, the ongoing reduction in workforce programs and the announced cost reduction actions at ST-Ericsson.

In conjunction with these efforts, ST posted second quarter restructuring and impairment charges of $86 million compared to $56 million and $185 million in the first quarter of 2009 and year-ago period, respectively.