- First quarter net revenues were $2.03 billion
- Gross margin was 35.4%
- Strong sequential growth in revenues and gross margin expected
for 2004 second quarter
Geneva, April 21, 2004 - STMicroelectronics (NYSE: STM) reported
financial results for the first quarter ended March 27, 2004.
First Quarter 2004 Financial Results
Net revenues for the first quarter were $2,029 million, 25.4% above
the $1,618 million of last year's first quarter, and down 4.0% sequentially
from the $2,113 million reported in the prior quarter. Revenues from
differentiated products were $1,371 million or 67.6% of net revenues
for the 2004 first quarter.
Gross profit was $718 million, 26.9% above last year's first quarter
gross profit of $566 million, and a 5.5% sequential decrease from the
prior quarter's $760 million. Gross margin was 35.4%, compared to 35.0%
reported for last year's first quarter, and the 36.0% of the prior quarter.
Pasquale Pistorio, President
and Chief Executive Officer, commented, "For the first time,
ST's first quarter revenues exceeded the $2 billion mark. As anticipated,
overall market demand partially offset the seasonality that generally
affects our first quarter revenue performance, although we did experience
some shipment delays at the end of the period. Gross margin, however,
was somewhat higher than our initial expectations, benefiting from a
more stable pricing environment for certain product families and manufacturing
efficiencies."
In the 2004 first quarter, research and development expenses were $363
million, 28.3% above the $283 million reported in the comparable year-ago
period, and 2.5% above the $354 million expended in the prior quarter.
R&D costs represented 17.9% of net revenues in the 2004 first quarter
compared to 17.5% of net revenues in the year ago quarter, and 16.8%
of net revenues in the prior quarter.
Selling, general and administrative expenses were $230 million for the
2004 first quarter, 32.2% above the $174 million incurred in the comparable
year-ago period, and 0.9% above the prior quarter's $228 million. As
a percentage of net revenues SG&A expenses increased to 11.3%, from
10.8% in last year's first quarter and 10.8% in the prior quarter.
For ST, the average sequential increase in the value of the Euro versus
the U.S. dollar in the 2004 first quarter was approximately 7%. This
particularly affected ST's reported R&D and SG&A costs, which are primarily
Euro-denominated.
Mr. Pistorio noted, "R&D spending increased in both absolute dollars
and as a percentage of revenues in the first quarter, reflecting an
acceleration of our investments in new product development, which is
likely to continue for the next several quarters. The more modest increase
in SG&A expenses is primarily related to new marketing programs that
we established in 2003, and that have been successful in building our
sales volume with a broader group of key customers."
Operating income was $80 million in the 2004 first quarter, including
$33 million of impairment, restructuring charges and other related closure
costs, compared to $124 million reported in the prior year's first quarter.
Operating income in the 2003 fourth quarter was $153 million, which
included $12 million in impairment, restructuring charges and other
related closure costs.
In March 2004, the Company received a new tax ruling in one of its jurisdictions,
which will affect future periods. The related change in deferred tax
liability was recognized in the 2004 first quarter and resulted in a
one time tax benefit of $13 million.
Net income equaled $77 million in the 2004 first quarter, compared to
$79 million in last year's first quarter and $144 million in the 2003
fourth quarter. Earnings per diluted share were $0.08 for the 2004 first
quarter, including charges, compared to $0.09 in the 2003 first quarter,
which included a one-time pre-tax charge of $8 million related to Bond
repurchases. Earnings per diluted share were $0.16 in the 2003 fourth
quarter, including charges.
Summarizing, Mr. Pistorio said, "ST's year-over-year quarter revenue
performance benefited from strong gains in all key product families
and applications. On a sequential basis, modest revenue increases were
posted by Micro and Memories and Discretes; Automotive was up about
10%; other applications showing sequential growth included: Wireline,
Printers, Imaging and Industrial. Flash memory product sales were $277
million, flat with fourth quarter 2003 levels, and up 83% from last
year's first quarter."
"Profitability for the period, however, was constrained by lower gross
margin, the reduced value of the U.S. dollar and higher R&D and SG&A
expenditures," Mr Pistorio said. "Additionally," he noted, "first quarter
earnings were penalized by impairment, restructuring charges and related
closure costs of $33 million relating to our previously announced 6-inch
restructuring plan."
Balance Sheet Highlights at March 27, 2004
At March 27, 2004, ST had cash, cash equivalents, and marketable
securities of $3.13 billion. Total debt was $3.0 billion, of which $2.92
billion was long-term; shareholders' equity was $8.04 billion. Net cash
from operating activities in the first quarter was $552 million. Capital
expenditures were $321 million in the 2004 first quarter, compared to
$256 million in the 2003 first quarter. Net operating cash flow ( )
was $215 million in the 2004 first quarter.
Additional First Quarter 2004 Financial and Operating Data
The following tables and commentary provide a breakdown of revenues
and operating income by product group and segment revenues by product
category, targeted market, and geographical region.
First Quarter 2004 Net Revenues and Operating Income by Product Group:
| Group |
Revenue(Million
US$) |
% of Net Revenue |
Operating IncomeQ1
2004(Million US$) |
| Telecommunications, Peripherals and Automotive (TPA) |
$840 |
41.4% |
$114 |
| Discrete and Standard ICs (DSG) |
356 |
17.5% |
51 |
| Memory Products (MPG) |
452 |
22.3% |
5 |
| Consumer and Microcontroller (CMG) |
364 |
18.0% |
18 |
| OTHER* |
17 |
0.8% |
(108) |
| TOTAL |
$2,029 |
100.0% |
$80 |
(1) Net revenues of "Other" include revenues from sales of Subsystems
and other revenues.
(2) Operating income of "Other" includes items such as impairment, restructuring
charges and other related closure costs, start-up costs, and other unallocated
expenses such as: strategic or special research and development programs,
certain corporate level operating expenses, patent claims and litigations,
and other costs that are not allocated to the product groups, as well
as operating earnings or losses of the Subsystems and Other Products Group.
(* ) Net operating cash flow is defined as net cash from operating activities
minus net cash used in investing activities ($1,367 million) excluding
payments for purchases of and proceeds from the sale of marketable securities
($1,030 million)
All key product groups reported solid year-over-year revenue growth. MPG
led with a 72.3% increase; DSG was up 30.8%; CMG increased 29% and TPA
was up 7%. On a sequential basis, DSG was the only group to show improvement,
with revenues up 1.6%. TPA and CMG declined 6.8% and 6.0%, respectively;
while MPG was down 1.3%. Despite reduced revenues, all major products
groups posted operating profits for the period.
Q1 2004 Revenue Breakdown by Product Category
| |
Revenue(Million US$) |
% of Net Revenue |
| Differentiated Products |
$1,371 |
67.6% |
| Standard & Commodities |
97 |
4.8% |
| Micro & Memories |
289 |
14.2% |
| Discretes |
272 |
13.4% |
Three out of four product categories reported double-digit, year-over-year
revenue growth. Micro & Memories was up 44.9%; Discretes increased 36.9%;
and Differentiated Products rose 21.1%. Standard & Commodities was up
9.9%. Sequential growth of 2.3% and 1.3% was achieved by Discretes and
Micro & Memories, respectively. Differentiated Products and Standard &
Commodities declined 6.3% and 1.0%, respectively, on a sequential basis.
Q1 2004 Revenue Breakdown by Market Segment
The following table estimates, within a variance of 5% - 10% in the absolute
dollar amount, the relative weighting of each of the Company's target
market segments in the first quarter of 2004.
| MarketSegment |
% of Net Revenue |
| Automotive |
14% |
| Consumer |
20% |
| Computer |
17% |
| Telecom |
33% |
| Industrial & Other |
16% |
Significant double-digit, year-over-year growth of between 20% and 30%
was achieved by all market segments, with the exception of Computer which
was up about 10%. On a sequential basis, Automotive showed solid growth
and Industrial was up slightly.
|Q1 2004 Geographic Revenue Breakdown
| By Customers' Region of Origin |
By Location of Order Shipment |
| |
Revenue(Million US$) |
% of Net Revenue |
|
Revenue(Million US$) |
% of Net Revenue |
| Europe |
$925 |
45.6% |
Europe |
$555 |
27.3% |
| North America |
593 |
29.2% |
North America |
302 |
14.9% |
| Asia/Pac |
320 |
15.8% |
Asia/Pac |
854 |
42.1% |
| Japan |
120 |
5.9% |
Japan |
87 |
4.3% |
| Emerging Markets |
71 |
3.51% |
Emerging Markets |
231 |
11.4% |
All regions posted solid year-over-year revenue gains. By Customers' Region of Origin, Asia/Pac and Emerging Markets were the best sequential performers, increasing 11.6% and 10.0%, respectively. At 43.4% of net revenues, Asia/Pac was by far the largest region by Location of Order Shipment.
Outlook
Looking ahead, Mr. Pistorio commented, "We expect to report strong sequential
growth in revenues and gross margin in the 2004 second quarter. Based
upon backlog data and order flow, we anticipate that second quarter revenues
will increase from 6% to 12% on a sequential basis, which translates into
year-over-year growth of between 26% and 33%. The market segments driving
this growth should include Automotive, Consumer, and Industrial. Also,
Flash memory product sales are expected to post a solid sequential increase."
"Importantly," Mr. Pistorio noted, "second quarter gross margin
is expected to be approximately 37%, benefiting from higher revenue levels,
manufacturing efficiencies, and an improved pricing environment."
Mr. Pistorio added, "All indications are that order rates for ST products
will continue strong throughout 2004. In response to current industry
dynamics, and reflecting our longer term view of ST's market positioning,
we have decided to increase 2004 capital expenditures to approximately
$2.2 billion, from the $1.6 billion that we initially budgeted. Approximately
two- thirds of this amount will be allocated to leading-edge technologies
and R&D programs."
Concluding, Mr. Pistorio noted "We expect 2004 to be a year of progressive
growth in revenues and profitability for ST, and we believe that the prospects
for 2005 are solid. Therefore, we are allocating our resources in order
to maximize our competitive position while making investments in technology,
product development, and customer service and support to ensure ST's continued
leadership in our targeted market segments."
Corporate Developments
On March 15, 2004, the Supervisory Board announced that it had approved
Pasquale Pistorio's recommendation for his succession and will propose
that Mr. Carlo Bozotti be appointed as Sole Member of the Management Board
and President and Chief Executive Officer of STMicroelectronics, subject
to approval by the Company's shareholders at the 2005 Annual General Meeting.
As part of the succession plan, the Supervisory Board also announced that
it will endorse the appointment of Mr. Alain Dutheil as Chief Operating
Officer.
STMicroelectronics will hold its Annual General Meeting on April 23, 2004.
The main resolutions to be voted upon include: a 50% increase in the cash
dividend to $0.12 per share, the appointments of Mr. Gérald Arbola and
Mr. Didier Lombard as Supervisory Board Members, and the reduction of
the quorum for the General Meeting of Shareholders required to adopt valid
resolutions from one-third to 15% of the Company's issued share capital,
and corresponding amendments to the Company's Articles of Association.
Products, Technology and Design Wins
- A joint ST/Nokia RF Design Center, located in San Diego, California,
became fully operational.
- ST supplied Wireless-LAN 802.11g baseband (Phaser) samples to a
leading cellular phone manufacturer. Production of these chips is
expected to start in 2005.
- ST's GSM/GPRS chipset, protocol stack, and integrated application
environment has been selected by a leading ODM/EMS company in the
cellular terminals market. The chipset is supported by a wealth of
tools for the various steps of development, debugging, and production
tuning. The first application will be a 'clamshell' and camera phone
with the intention to supply several handset OEM companies. Also in
this market, ST gained a number of ASIC design wins with a leading
terminal manufacturer. In addition, ST gained a design-win from a
top-tier manufacturer for a CDMA chipset. Production is expected to
start in 2005.
- ST's Nomadik multimedia application processor chip won the prestigious
Microprocessor Report Analysts' Choice Award as the Best Application
Processor. The analysts cited Nomadik's "system-like configuration,
separating on-chip functions and memory support for best performance;
its use of well-established VLIW DSP engines with plenty of software
to support them; and its ability to turn off all resources belonging
to a function not needed by the system or by the useras key differentiators.
- At the 3GSM World Congress in Cannes, France, ST announced the
world's smallest triple-band GSM/GPRS transceiver modules for mobile
phones. These modules apply silicon-germanium radio-frequency BiCMOS
and Integrated Passive and Active Device (IPAD) technologies to simplify
terminal design.
- ST gained a Bluetooth design win for a cellphone application. Production
will start in the second half of 2004. Additionally, ST started sampling
its single-chip Bluetooth solution, which is compliant with Bluetooth
Rev 1.2.
- A design-win was achieved at Remotek for ST's Bluetooth chipset
using Human Interface Device (HID) solution for use in PC keyboard/mouse
applications.
- ST confirmed its leadership in the DSL (Digital Subscriber Line)
chipset market with a total of 76 million DSL ports shipped worldwide
since 1998, a 35 percent share of the total xDSL market. The company
shipped 25.1 million ports in 2003 alone. In addition to upgraded
orders from a number of ADSL modem suppliers worldwide, ST also received
a major order for an ADSL Router chipset from T&W, a major Chinese
ADSL modem supplier.
- ST brought to market two new chip families for the emerging integrated
digital-TV market: a new family of multi-standard TV sound demodulation
and audio processing devices; and an LCD-TV processor that offers
all the digital functions needed to implement matrix-display TV sets
in a single chip.
- ST further expanded its industry-leading OMEGA family of STB decoders
with a new chipset supporting full dual TV and dual PVR (Personal
Video Recorder) functionality.
- ST began sampling its single-chip, audio-video, full-duplex codec
for the DVD and HDD (hard disk drive) recorder market. With its open
and flexible architecture, the device brings audio/video encoding
to DVD or HDD recording products and includes state-of-the-art DVD-player
features.
- ST announced its first single-chip solutions for both digital terrestrial-TV
(DTT) and digital cable-TV set-top boxes (STBs), offering simplified
design and lower costs for digital STB manufacturers. Depending on
the type of broadcast signal received by the viewer, the new chips
allow the viewing of digital terrestrial or digital cable TV channels
on analog TVs.
- ST announced the joint development with NDS of a Secure Video Processor
(SVP)-compliant content-protection solution. SVP security ensures
that digital content, such as audio and video, transferred outside
of the SVP device itself, is always in an encrypted form for devices
such as digital TVs, set-top boxes, DVRs, mobile phones, and other
portable players.
- The first devices in ST's new portfolio of NAND Flash memories
entered volume production. The new 1-Gbit and 512-Mbit products provide
effective data-storage solutions for high-volume applications such
as USB Flash drives, digital consumer products, cameras and third-generation
cell phones.
- ST's three-axis accelerometer, which uses Micro-Electro-Mechanical
System (MEMS) technology, won EDN magazine's Innovation of Year Award
for 2003 in the Components category. Further to this, ST also sampled
a new version of this award-winning device providing, for the first
time, both three-axis sensing and a digital output in a single package.
Also in the EDN Awards, a low-dropout Rad-Hard regulator from ST was
one of three finalists in the Power IC category.
- ST demonstrated full interoperability of its Serial ATA Physical
Layer Interface intellectual property (IP), which was combined with
a device controller from Palmchip and configured to simulate a typical
disk drive.
- ST delivered full working samples of a radio-frequency front-end
IC for the XM Radio system. The new IC was supplied as part of a kit
with the already existing single-chip baseband decoder. The kit provides
a full solution for the XM Radio system, from the 2.4GHz S-Band to
the I2S interface. Production is expected to start in the third quarter
of 2004.
- ST shipped a new, single-chip audio power amplifier that delivers
200W, the highest power available from a commercial integrated device.
The new amplifier combines the patented BASH high-efficiency technology,
licensed from Indigo Manufacturing, with ST's proprietary Bipolar-CMOS-DMOS
(BCD) process technology.
- At Embedded World 2004, ST announced an extension to its ST7 family
of 8-bit microcontrollers with the launch of a new family specifically
optimized for the control of three-phase induction and permanent magnet
brushless motors.
All statements included in this release and in the related conference
call, other than statements which constitute historical facts are forward
looking statements which are based on Management's current expectations,
views, beliefs and assumptions as of the date of this release.
Such statements, which inter alia describe the Company's business strategy,
relationships, outlook, plans, intentions or goals, are subject to various
risks and uncertainties, which may cause actual results and performance
of the Company's business to differ materially and adversely from the
forward-looking statements.
Factors which may cause actual results or performance to differ materially
from the expectations of the Company or its Management include:
emand for semiconductor products in the key application markets
served by the Company's products;
- The demand for semiconductor products in the key application
markets and from key customers served by the Company's products;
- Further strong decline in the exchange rates between the US
Dollar and the Euro, and the US Dollar and the currencies of the other
major countries in which the Company currently has its operating infrastructure;
- The development and volume production of new manufacturing technologies
in leading edge fabs and at our outside suppliers in time to meet
the demand of company's customers;
- The intensively competitive and cyclical nature of the semiconductor
industry, and the ability of the Company to compete in products and
prices in such an environment;
- The ability of the Company to develop, manufacture and market
innovative products in a rapidly changing technological environment;
- Changes in the economic, social, political and health conditions
in the countries in which the Company and its key customers operate;
- The anticipated benefits of Research & Development alliances
and cooperative activities;
A more detailed discussion of these factors and the other "Risk
Factors", which may from time to time materially and adversely affect
the Company, is contained in our Annual Report or Form 20-F of the year
ended December 31, 2002, which was filed with the SEC on March 14, 2003.
Conference Call Information
The management of STMicroelectronics will conduct a conference call
on April 22, 2004 at 9:00 a.m. U.S. Eastern Time / 3:00 p.m. CET, to
discuss operating performance for the first quarter of 2004.
The conference call will be available via the Internet by accessing
the following Web address: www.vcall.com.
Those accessing the webcast should go to the Web site at least 15 minutes
prior to the calls, in order to register, download and install any necessary
audio software. The webcast will be available until April 30, 2004.
About STMicroelectronics
STMicroelectronics is a global leader in developing and delivering semiconductor
solutions across the spectrum of microelectronics applications. An unrivalled
combination of silicon and system expertise, manufacturing strength,
Intellectual Property (IP) portfolio and strategic partners positions
the Company at the forefront of System-on-Chip (SoC) technology and
its products play a key role in enabling today's convergence markets.
The Company's shares are traded on the New York Stock Exchange, on Euronext
Paris and on the Milan Stock Exchange. In 2003, the Company's net revenues
were $7.24 billion and net earnings were $253 million. Further information
on ST can be found at http://www.st.com
|
|
|
