Mr. Bozotti stated, "As we saw during the end of the second quarter, the global economic environment has weakened. As a result, bookings in June softened and remain somewhat volatile.

"Nonetheless, we continue to expect sequential revenue growth and gross margin improvement with respect to the third quarter, thanks to our new product momentum, in particular in MEMS, microcontrollers and Power MOSFET & IGBT.

"Looking forward, key operational priorities as we navigate the softness in the market environment include market share gains in the second half of the year and careful management of our assets and investments in order to maintain ST's solid net financial position. In this regard, we are reducing by approximately 25% our full year 2012 capital expenditures plan to be in the range of $500 to $600 million for 2012.

"Furthermore, we are focused on delivering continued expense reduction. Overall, we will become a much leaner company with increased flexibility to adjust to market conditions and reduce our earnings volatility."

The Company expects third quarter 2012 revenues to grow sequentially in the range of about +2.5%, plus or minus 3 percentage points. Reflecting a similar level of utilization at our facilities compared to the second quarter, gross margin in the third quarter is expected to be about 35.3%, plus or minus 1.5 percentage points.

This outlook is based on an assumed effective currency exchange rate of approximately $1.27 = EUR 1.00 for the 2012 third quarter and includes the impact of existing hedging contracts. The third quarter will close on September 29, 2012.

Recent Corporate Developments

On April 23, ST announced its next step in Multimedia Convergence, focused on offering a unified processing platform to serve a broad range of multimedia devices like set-top-boxes, TVs, car infotainment, smartphones and tablets. The plan includes combining the strengths of ST-Ericsson through a strategic partnership in which ST is taking on ST-Ericsson's application processor development R&D activity and licensing back the technology to ST-Ericsson for integration into their ModAps (competitive integrated modem plus application processor solutions) for smartphones and tablets. Additionally, the two companies entered into a commercial agreement that enables ST to offer stand-alone application processors for multiple applications, including smartphones and tablets. By consolidating the expertise to master all of the key technologies necessary to serve the multi-screen society, the strategy vaults ST into the league of very few companies able to provide complete solutions based on a unified processing platform that delivers the features required by its customers and the whole ecosystem. On July 1, ST completed the transfer of the application processor development organization from ST-Ericsson.

On May 30, ST announced that all the resolutions proposed by the Supervisory Board were approved at the Company's Annual General Meeting (AGM), which was held in Amsterdam.
The main resolutions approved by shareholders were:

• The appointment of Ms. Martine Verluyten as a new member of the Supervisory Board for a three-year term, expiring at the 2015 Annual General Meeting, in replacement of Mr. Doug Dunn whose mandate has expired;
• Approval of the Company's 2011 accounts reported in accordance with International Financial Reporting Standards (IFRS); and
• The distribution of a cash dividend of US$0.40 per share, to be paid in four equal quarterly installments.

On June 11, ST announced that it had secured additional sourcing for its leading-edge 28nm and 20nm FD-SOI (Fully-Depleted-Silicon-on-Insulator) technology with GLOBALFOUNDRIES. The technology, developed by ST and already selected by ST-Ericsson for its future mobile platforms, is ideal for its faster design and superior power performance, while enabling product-cost and power reductions.

On July 2, ST announced the publication of the Company's 2011 Sustainability Report. The report provides comprehensive details of ST's Sustainability strategy, policies and performance during 2011 and illustrates how ST embeds sustainability into its business practices to create value for all of its stakeholders.

Q2 2012 - Product and Technology Highlights

During the quarter, ST made solid progress with important new-product introductions and significant design wins in its key growth areas, including energy management & savings, trust & data security, healthcare & wellness and smart consumer devices.

Automotive

• Collected several design wins in countries around the world for modules that control car-body applications, such as lighting, door zone, and power management.
• Awarded a design win for the first automotive audio power amplifier for 24V commercial vehicles for a major Korean customer.
• Awarded design wins for next-generation transmission and engine management from major Tier1 manufacturers in Japan and Europe for worldwide car makers.
• ST's Cartesio+ Navigation Processor and AM/FM Tuners ICs have won a design at Garmin for the factory-installed infotainment system for Suzuki's 2013 American models.
• ST has achieved additional successes in Advanced Driver Assistance Systems, having established sales relationships with 14 OEMs that have sourced the computer-vision-based platform. We are now sampling the third generation system-on-chip. From 2015, the EU new car assessment program ties 4- and 5-star ratings to Autonomous Emergency Braking (AEB) systems for car-to-car and car to vulnerable road user crashes, which will drive OEMs to provide AEB as a standard feature in their cars.

Digital Sector
Digital Convergence

• Earned numerous design wins for MPEG2 in Asia and in India Cable Set Top Box market and for MPEG4 set-top box worldwide market, including fast adoption of the new 40nm families in Cable, Terrestrial, Satellite and IPTV.
• Collected an additional important design win for Orly 32nm from a telecom operator in Asia.
• Earned several designs with key Tier 1 OEMs for TV, teleconferencing and CE accessory products using the MYSTIQUE product family, the industry's first DisplayPort 1.2 and HDMI 1.4 converters supporting up to 4Kx2K video formats and high bit-rate audio.
• Earned a design win for a networking ASIC in 28nm technology from a major customer.

Imaging, Bi-CMOS, ASIC and Silicon Photonics

• Collected 5 new major business awards for image sensors, camera modules, and chipsets (sensor/camera + image signal processors) at 3 leading mobile handsets brands for front-side and back-side illumination image sensors and cameras.
• Awarded design win for new large size CMOS X-Ray sensors for medical applications at a leading European manufacturer.

Analog, MEMS and Microcontrollers

• Started deployment of STarGRID Power Line Communication SoC for new Smart Metering programs in China. Won a slot with a major PC OEM for the STM32 in a keyboard controller.
• Added to healthcare and fitness portfolio of design wins with several more STM32 design-ins.
• Announced the use of the STM32 in the invisible bicycle helmet invented by Hövding, a Swedish design house.
• Earned design wins for a system-in-package that includes ST's NFC contactless interface and tamper-proof Secure Element in a smart meter developed for China by Wasion, a leading supplier of advanced energy metering products.
• Achieved a win for secure microcontroller for brand protection by a major Japanese printer manufacturer.
• Ramped production of a pressure sensor and an iNEMO inertial module containing an integrated gyroscope and accelerometer for Samsung's latest and most advanced smartphone.
• Began production for accelerometers for top European and Chinese smart-phone makers.
• Achieved design wins for motion MEMS devices from a leading gaming-system manufacturer
• Earned first design wins for RF Sub-GHz RF transceiver in security-system and medical applications.
• Collected significant design wins at major tablet manufacturers for high-performance analog devices and MEMS microphones. The MEMS microphones were also included in the approved vendor list from a major US PC maker for a Windows 8 platform.
• Awarded the temperature-sensor socket for an important tablet from a major US corporation.

Power Discretes

• Earned a design win for high-end LED platform from a key European lighting player.
• Won sockets for extra-low capacitance protection devices in high-speed applications with several leading smartphone and consumer electronics manufacturers.
• Collected multiple design wins in Asia for Power transistors in a broad range of applications, in the Automotive, Telecom, Computer and Consumer segments.
• Achieved an important design win in the medical sector for ST's ultra-fast diodes with a large US-headquartered manufacturer.