Wed, Jan 25, 2012 - Page 5 News List

STMicroelectronics predicts sales drop as wireless slumps

Bloomberg

STMicroelectronics NV, Europe’s largest semiconductor maker, predicted that first-quarter revenue will fall as much as 10 percent from the previous three months because of lower sales at its wireless business.

Revenue will decline to between US$1.97 billion and US$2.1 billion from US$2.19 billion in the fourth quarter due to “a very significantly weaker revenue performance from ST-Ericsson,” its wireless-chip joint venture with Ericsson AB, the Geneva-based company said in a statement. Analysts had estimated revenue of US$2.08 billion, according to a Bloomberg survey.

“For ST-Ericsson, managing the wireless joint venture’s shift from a legacy portfolio to the new product road map has proven more challenging than expected given the change in the business of one of their largest customers and its evolving plans,” STMicroelectronics chief executive officer Carlo Bozotti said in the statement, released after the close of trading in New York.

NEW PORTFOLIO

“While the new portfolio is beginning to ramp, the current results of ST-Ericsson are still distant from the financial prospects we are envisioning,” Bozotti said.

STMicroelectronics has been hampered by losses at ST-Ericsson, which hasn’t turned profitable since its formation in 2009. The venture, which is shifting to new products, said its fourth-quarter net loss widened to US$231 million from a loss of US$177 million a year earlier. Net sales fell to US$409 million from US$577 million.

STMicroelectronics has also been hurt by the struggles of Nokia Oyj, one of its biggest customers. Nokia has had difficulty producing handsets that can compete with Apple Inc’s iPhone or models running Google Inc’s Android.

“We see the opportunity to continue to grow in selected markets during 2012, but we remain concerned about the macroeconomic uncertainty,” Bozotti said.

BOOKINGS BOTTOM

The company is running its plants at less than full capacity, he said.

“Based on current visibility, we believe bookings have bottomed,” Bozotti added.

STMicroelectronics posted a loss in the fourth quarter as demand for chips decreased amid Europe’s financial crisis. The net loss was US$11 million, compared with net income of US$219 million a year earlier. Sales declined 23 percent to US$2.19 billion. Analysts surveyed by Bloomberg had estimated a net loss of US$30.6 million and revenue of US$2.22 billion.

STMicroelectronics forecast that first-quarter gross margin, the percentage of revenue left after subtracting manufacturing costs, will be about 33 percent, plus or minus 1.5 percentage points, from 33.4 percent in the fourth quarter, “reflecting an improved, but still high level of unsaturation at our facilities.”

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