Bloomberg News

STMicroelectronics Falls After Forecast Misses Estimates

October 25, 2011

(Updates with remarks from conference call starting in third paragraph.)

Oct. 25 (Bloomberg) -- STMicroelectronics NV, Europe’s largest semiconductor maker, fell as much as 7.8 percent in Paris trading after the company said fourth-quarter sales would miss analysts’ estimates in a weakening market.

Net revenue will range from $2.15 billion to $2.3 billion, the Geneva-based company said in a statement late yesterday. That compares with an average analyst estimate of $2.52 billion, according to Bloomberg data. Gross margin, the percentage of sales remaining after production costs, will be 33.5 percent, plus or minus 1.5 percentage points, also below estimates, the company said.

“The weakness is across the board, both from applications and market segments, and also geographically,” Chief Executive Officer Carlo Bozotti said in an interview with Bloomberg Television today. “I don’t think it is like 2008, but demand is clearly lower,” the CEO said later on a conference call.

The shares fell 7.2 percent to 5.07 euros at 10:34 a.m., bringing STMicroelectronics’ loss to 35 percent this year.

The chipmaker in July predicted a “correction” in sales and gross margin in the third quarter because of difficulties at Nokia Oyj, its biggest customer and the world’s largest maker of mobile phones. Infineon Technologies AG said this month that sales will decline this quarter as the European debt crisis makes clients more reluctant to spend.

Profit Falls

STMicroelectronics’ third-quarter net income declined to $71 million, compared with $198 million a year earlier. Net sales fell 8.3 percent to $2.44 billion. Net income had been estimated at $84.2 million on sales of $2.48 billion, according to analysts’ projections compiled by Bloomberg.

Nokia is releasing its first smartphones based on Microsoft Corp.’s Windows Phone 7 software this quarter after losing ground to handsets based on Google Inc.’s Android system.

Texas Instruments Inc., the largest maker of analog semiconductors, late yesterday forecast lower fourth-quarter sales than analysts had estimated on sluggish demand for electronics.

Intel Corp., the world’s biggest chipmaker, forecast fourth-quarter sales last week that exceeded some estimates, citing strong demand for laptop computers in emerging markets.

Chip Venture

STMicroelectronics has also been affected by losses at ST- Ericsson, its chip joint venture with Ericsson AB, which has struggled to make a profit since it was set up in 2009. ST- Ericsson said last week that its third-quarter net loss widened to $211 million from a year earlier as sales fell. ST-Ericsson, whose customers include Nokia and Samsung Electronics Co., expects net sales “to be slightly up sequentially” this quarter.

ST-Ericsson announced cost cuts aimed at saving $120 million a year in June and dropped its target date to become profitable. The cuts will affect as many as 500 jobs, the company said. The venture previously predicted breaking even in the second quarter of 2012.

Bozotti said today that it is “not the right time” to consider disposing of the stake in ST-Ericsson.

“We are pleased to see that great companies like HTC have endorsed our products, and we are convinced that our R&D effort will pay off,” the CEO said.

--Editors: Jerrold Colten, Robert Valpuesta

To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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