ASG posted strong net revenue growth of 15.9% and 8.4% in comparison to the year-ago and prior periods, respectively. ASG's operating profit improved sequentially largely due to mix improvement, while declining on a year-over- year basis driven by a combination of currency factors and increased R&D expenses coming from the Genesis and wireless IC design-team acquisitions as well as a higher level of design activity.
IMS sales also rose sharply, with net revenues increasing 12.8% year-over- year and 11.9% sequentially. IMS operating profit was $132 million, improving both sequentially and year-over-year, reflecting improved volume, mix - notably driven by product emphasis in Advanced Analog and ICs, - and efficiency, which more than offset currency impacts.
First Half 2008 Results
In this press release the income statement for the first half of 2008 incorporates FMG for the first three months of 2008.
In Million US$ and %
Net Revenues First Half First Half Year-over-Year
2008 2007 Growth
ST ex FMG $4,570 $4,039 13.2%
ST including FMG $4,869 $4,693 3.8%
Net revenues for the first half were $4,570 million, increasing 13.2% compared to 2007 first half revenues of $4,039 million (excluding FMG). Gross profit increased 9.6% to $1,779 million, or 36.5% of net revenues, compared to $1,623 million or 34.6% of net revenues for the 2007 first half. Operating loss was $114 million, compared to operating loss of $710 million in last year's first half. Net loss was $131 million, or $-0.15 per share, compared to net loss of $684 million, or $-0.76 per share for the 2007 first half. Net loss included pre-tax restructuring, impairment charges and in-process R&D costs of $459 million ($0.45 per diluted share impact) and $918 million ($1.01 per diluted share impact) for the 2008 and 2007 first half results, respectively.
Research and development expenses were $978 million, including a $21 million in-process R&D charge associated with the closing of the Genesis Microchip acquisition, compared to $881 million in the 2007 first half. Selling, general, and administrative expenses were $585 million compared to $531 million in the 2007 first half.
In the 2008 first half, the effective average exchange rate for the Company was approximately $1.51 to euro 1.00, compared to $1.31 to euro 1.00 for the 2007 first half.
First Half 2008 Financial and Operating Data by Product Segment
The following table provides a breakdown of revenues and operating income
by product segment.
In Million US$ and % First Half 2008
Operating
Net % of Net income
Product Segment Revenues Revenues (loss)
ASG (Application Specific Product Groups) $2,904 59.7% $42
IMS (Industrial and Multisegment Sector) 1,637 33.6% 222
FMG (Flash Memories Group) 299 6.1% 16
Others (1)(2) 29 0.6% (394)
TOTAL $4,869 100% $(114)
(1) and (2) defined in earlier table.
Outlook
Mr. Bozotti stated, "Despite the current macroeconomic situation we expect ST's sequential net revenue growth to be in the range between -1% and 6%, which represents year-over-year growth of between 7% and 14%. The third quarter 2008 gross margin is expected to be equal to the second quarter level of 36.8%, plus or minus one percentage point."
This outlook is based on an assumed currency exchange rate of approximately $1.57 = euro 1.00 for the 2008 third quarter, which reflects current exchange rate levels combined with the impact of existing hedging contracts. Additionally, this outlook is provided for ST as currently configured and does not include any impact of the ST-NXP Wireless joint venture, which is expected to close in the 2008 third quarter. ST's third quarter 2008 results will also include the Company's pro-rata portion of Numonyx' second quarter 2008 financial performance in the income statement line 'Earnings(loss) on equity investment,' reflecting the anticipated one quarter lag in reporting.
Recent Corporate Developments
-- At the Company's Annual General Meeting, which was held in Amsterdam on
May 14, 2008, all of the proposed resolutions were approved. The
Company's 2007 accounts in accordance with International Financial
Reporting Standards (IFRS) were approved. The shareholders reappointed
the following members of the Supervisory Board: Mr. Gerald Arbola, Mr.
Tom de Waard, Mr. Didier Lombard, Mr. Bruno Steve, in addition to
appointing Mr. Antonino Turicchi, for three-year terms, expiring at the
2011 Annual General Meeting. The distribution of a cash dividend of
$0.36 per share, to be paid in four equal installments, was also
approved.
-- The complete Agenda and relevant detailed information concerning
the STMicroelectronics N.V. Annual General Meeting, as well as all
related AGM materials, is available on the Company's website
http://investors.st.com
-- On June 26, 2008, ST and NXP announced that the name of their new joint
venture will be ST-NXP Wireless, following the announcement on April
10, 2008, that the two companies would create a new company from their
respective mobile and wireless businesses, which together generated
US$3 billion in revenue in 2007. The management team of ST-NXP Wireless
will be comprised of experienced industry leaders from both parent
companies, with Alain Dutheil leading ST-NXP Wireless as Chief
Executive Officer. The new company will begin operations in a strong
position to meet customer needs in 2G, 2.5G, 3G, multimedia,
connectivity and future wireless technologies.
-- On June 30, 2008, ST published its 2007 Corporate Responsibility
Report, which is available for download at www.st.com/cr. The report,
which covers all of ST's activities and sites in 2007, contains
detailed indicators of the Company's performance across the full range
of Social, Environmental, Health & Safety, and Corporate Governance
issues and reaffirms ST's long-established commitment to serving its
stakeholders with integrity, transparency and excellence.
Products, Technology and Design Wins
Application-Specific Product Highlights
-- In wireless, ST announced the intention to develop an analog baseband
for a future high-volume EMP (Ericsson Mobile Platforms) platform,
within the existing partnership between the two companies. This effort
builds upon the successful joint development and the start of
production of 3G and 3.5G digital baseband processors for EMP's
licensees.
-- Also in the wireless area, due to its expertise in mobile multimedia,
ST was nominated as one of the founding members of the Symbian
Foundation, along with other major leaders in the mobile handset
industry. The intention of the Foundation is to unite leading operating
systems to create one open mobile software platform. As part of its
membership, ST is to contribute some of its IP and reference platforms
to the foundation.
-- In communications infrastructure applications, ST gained five design
wins from three leading OEMs for devices implemented in 65nm process
technology, some of which included embedded DRAM and other analog
options, confirming ST's leading position in delivering CMOS-derivative
process technology to infrastructure customers.
-- In imaging, ST introduced a new high-performance stand-alone Image
Signal Processor with dual-camera support that brings DSC-like
performance to cellphones, PDAs, gaming devices and other mobile
applications. Capable of controlling the entire imaging subsystem in a
mobile phone, the processor supports a wide range of modules including
sensors with up to 5-megapixel resolution.
-- In digital consumer, ST continued to increase shipments of its
leading-edge H.264 decoder chips for the worldwide deployment of
high-definition digital set-top-boxes and integrated digital TVs. ST
has also sampled four different products, implemented in 65nm, to
world-leading manufacturers, targeting key segments of the set-top box
market.
-- In automotive, ST announced the first four 32-bit microcontrollers in
the company's new Power Architecture(TM) families, enabling integrators
to use the MCUs in powertrain, car body, chassis and safety, and
instrumentation systems. The devices will support advanced functions,
enable improved vehicle performance and economy, and deliver
development savings by promoting hardware and software reuse.
-- In powertrain applications, ST gained a significant design win for a
dynamic vehicle control and ABS (anti-lock braking system) platform
from a major Japanese car maker. Based on ST's BCD8 smart-power
process, the single-chip products will serve the full platform from
simple ABS solutions for low- and mid-level cars to full vehicle
control for the high-end segment. In car safety, ST and Mobileye
announced that the two companies have sampled the second generation of
the EyeQ2 system-on-chip for vision-based driver assistance systems. In
addition, ST achieved a major design win from a European tier one OEM
for a PSI5-protocol IC, which provides a simplified and safer interface
between the airbag sensor and car diagnostics. In production in 2009
with European, American and Japanese car makers, ST will be the first
non-captive-market vendor with an IC handling the PSI5 protocol.
-- In car-body applications, ST gained major design wins, including a
door-module chipset in the US market and for smart actuators in
body-control modules in China and India. ST also achieved several
design-ins at tier one OEMs worldwide for 8- and 32-bit MCUs.
-- In car communications, ST signed an agreement with WorldSpace(R)
Satellite Radio to develop, manufacture and distribute chips for
European Satellite Digital Radio receivers for a pan-European and
Middle East service offering. Also, ST started production of its
Nomadik-platform-based Cartesio automotive-grade application processor
with embedded GPS for three customers for telematics, handheld and
Personal Navigation Device (PND) applications. Additionally, ST gained
a design win for an AM/FM tuner IC at a major US OEM and a tuner
design-in at a major Japanese car radio maker, plus design wins for
audio power chips with a Japanese car radio maker and major US car
manufacturers.
-- In computer peripherals, ST gained two design wins in the US for its
SPEAr(R) family of configurable System on-Chip (SoC) ICs, in printers
and networking applications. Additionally, ST announced a new device in
the family: manufactured in state-of-the-art low-power 65nm technology,
SPEAr Basic addresses various embedded applications, including
entry-level printers, digital photo frames, Voice-over-IP and other
equipment.
-- In healthcare applications, ST and Debiotech introduced the first
evaluation prototypes of a unique miniaturized insulin-delivery pump.
The device, which could be a couple of years away from commercial
availability, relies on microfluidic MEMS technology and can be mounted
on a disposable skin patch to provide continuous insulin infusion,
enabling substantial advancements in the availability, treatment
efficiency and the quality of life of diabetes patients.
Industrial and Multi-Segment Product Highlights
-- In 32-bit microcontrollers, ST increased the scalability and peripheral
options of its breakthrough 32-bit STM32 Cortex(TM)-M3 MCU family with
devices providing up to 512 Kbytes of on-chip Flash, larger SRAM and
extra features for displays, sound, storage and advanced control, and
multiple power-saving modes for optimal performance in industrial
equipment, building-services controllers, medical devices and computer
peripherals. In 8-bit MCUs, ST launched a range of MCUs, based on the
STM8 core and specified for the industrial temperature range, that
boasts extra features for robustness and reliability.
-- In MEMS, in addition to gaining two significant design wins for sensors
in game controllers and another in a consumer application, ST
introduced a number of important new products, including its first
'Gyroscope' angular-rate sensors, which offer an extended voltage range
and reduced standby power for applications such as game controllers,
intuitive pointers, vehicle or personal navigation, and image
stabilization.
-- Also in MEMS, ST announced the first in a new family of 3D orientation
sensors that embed both 3D orientation functionality and click/double-
click detection, allowing developers to integrate mouse-button
controls. ST also added two new high-performance accelerometers to its
ultra-compact portfolio for super-small applications where high
performance is required in space-constrained applications, including
mobile phones, portable media players, digital still or video cameras,
and personal navigation devices.
-- For power conversion markets, ST gained a significant design win with a
major power-supply manufacturer for a Halogen-free product kit and also
ramped up production of power-converter and regulators ICs for several
PC notebook applications from major customers in the US and Asia. ST
also introduced new products including the VIPer17 off-line
switched-mode converter, step-up converters for LED backlights and
lighting, and a new multi-output regulator aimed at a range of PC and
consumer products.
-- Also in power applications, ST gained several design wins for MOSFETS
including high-end desktop PCs for a major customer and applications in
automotive and lighting. ST also announced a family of FDmesh(TM) II
fast-recovery MOSFETs that combine enhanced switching performance with
on-resistance improved by more than 18% over existing devices. And in
bipolar and IGBTs, ST gained numerous design wins in industrial,
medical and audio applications and introduced a new ESBT switch for
power supplies for single- and three-phase applications and a
PowerMESH(TM) IGBT for use in energy-sensitive circuits such as
lighting ballasts.
-- In application-specific discretes and IPADs(TM) (Integrated Passive and
Active Devices), ST introduced into the home-appliance market a
solid-state AC-switch driver that integrates switch-failure detection,
allowing designers to save board space and simplify the process to meet
various international safety standards. In telecom and consumer
applications, ST enlarged its IPAD range of combined ESD protection and
EMI filtering products dedicated to audio functions, and also
introduced protection devices dedicated to USB2.0 and Ethernet to meet
increasing data rates in connectivity and wireline applications.
-- In analog products, ST introduced a range of new devices including
interfaces and amplifiers and achieved numerous design wins in a range
of applications, such as mobile phone audio for a world-leading
manufacturer and use in data-storage products for two important
customers. And in advanced analog and mixed-signal, ST announced a new
family of silicon oscillators and a range of four- and five-channel
voltage supervisors for computer, consumer and communications
applications, in addition to picking up several design wins and product
qualifications in the advanced analog field from world-leading makers
of mobile phones, computer and PNDs.
-- In advanced logic, ST gained numerous design wins for logic switches
and translators in computer and communications applications from major
notebook and mobile phone manufacturers. ST also announced a new
touch-screen controller IC that offers autonomous functionality to
minimize demands on the system processor in applications such as PDAs,
mobile phones, GPS receivers, game consoles and POS terminals.
Technology Highlights
-- ST announced the deployment of a certified electronic system-level
(ESL) System-on-Chip reference design flow aimed at complex designs for
next-generation consumer electronics equipment. The design flow has
been adopted and internally distributed following successful tape-outs
of more than a dozen ASIC designs with productivity gains from four to
ten times faster than with traditional methods.
-- ST and CMP (Circuits Multi Projects(R)) announced that the two
companies are offering Chinese universities access to ST's most
advanced CMOS processes for academic and research purposes. ST will
ensure the certification of the local partners and the fabrication of
the ICs designed by the universities, while CMP will be the interface
for commercial and technical aspects.
