STMicroelectronics Posts Significant Increases in Second Quarter Results (Check the STB and MSFT news)
GENEVA--(BUSINESS WIRE)--July 20, 1999--
Net Income Up 16.6% Over First Quarter, on a 6.9%
Sequential Revenue Gain
Gross Profit Reaches $470.7 Million, or 39.5% of Net Revenues
STMicroelectronics (NYSE:STM) reported financial results for the
second quarter and first half ended July 3, 1999.
Second Quarter Results
Net revenues for the 1999 second quarter were $1,190.6 million,
11.2% above the comparable period last year, and a 6.9% sequential
gain over the prior quarter.
Gross profit was $470.7 million, up 14.8% and 10%, respectively,
from second quarter 1998 and prior quarter levels. Gross margin for
the second quarter was 39.5%, increasing from 38.4% in the 1999 first
quarter.
Commenting on second quarter performance, Mr. Pasquale Pistorio,
President and Chief Executive Officer of STMicroelectronics, noted, "A
surge in orders materialized in the first part of the second quarter
and continued, unabated, throughout the period. The significant
increases in orders and lead-times we experienced during the quarter
indicate that the long awaited market recovery is solidly underway."
Research and development expenditures were $202.8 million, or 17%
of net revenues, and reflected the Company's continued investment to
maintain its technological leadership. Selling, general and
administrative expenses remained relatively constant at $130.3
million, but declined to 10.9% of net revenues.
Operating income for the period reached $152.5 million, posting
increases of 22.2% and 16.1%, respectively, over year-ago and prior
quarter levels. Net income was $122.5 million, an increase of 25.6%
over the $97.5 million of the corresponding period of 1998. Earnings
per diluted share were $0.42, increasing 20% over the $0.35 reported
for the second quarter of 1998, and 16.7% over the $0.36 reported for
the first quarter of 1999. All per share figures have been adjusted to
reflect the 2-for-1 stock split effected in June 1999.
Mr. Pistorio commented, "We achieved significant operating
leverage in the period that flowed directly to the bottom-line. This
was attributable to higher revenues, and better utilization of our
manufacturing infrastructure."
Sales of differentiated products, which represented 61.6% of net
revenues, increased 9.1% on a year-over-year basis and 1.2%
sequentially, to reach $733.9 million for the period. Standard
products experienced stronger sequential growth due to better capacity
availability.
Sales gains over the second quarter of last year were achieved
across all the major product groups. The Telecommunications,
Peripherals and Automotive Groups (TPA) grew 14.3% and accounted for
45.2% of second quarter revenues; the Consumer and Microcontrollers
Groups (CMG) grew 3.1% and represented 17%; the Memory Products Group
(MPG), which includes Flash Memories, grew 15.1% and was 16.3%; the
Discrete and Standard ICs Group (DSG) grew 9% and equaled 19%. Others
accounted for 2.5% of second quarter revenues. All applications
recorded strong sequential growth with the exception of a 6% decline
in computer peripherals.
The strong increase in sales in the America and Asia/Pacific
regions resulted in Europe accounting for 35.1% of second quarter
revenues; America representing 25.4%; Asia/Pacific equaling 31.4%;
Japan representing 5%; and Region Five, which is comprised of emerging
markets, accounting for 3.1% of revenues.
First Half Results
Revenues for the first half of 1999 were $2,303.9 million, an 11%
increase over revenues of $2,075.7 million for the comparable period
in 1998. Net income increased 21.3% to $227.6 million, or $0.78 per
diluted share, from the $187.7 million, or $0.67 per diluted share,
reported for the same period in 1998. All per share figures have been
adjusted to reflect the 2-for-1 stock split effected in June 1999.
Gross profit was $898.6 million for the first six months,
compared to $795.0 million for the same period last year. Gross margin
was 39.0%, compared to 38.3% for the last year's first half.
Research and development expenditures increased 15.7% to $396.4
million, and represented 17.2% of net revenues.
First half 1999 selling, general and administrative expenses
increased marginally to $249.4 million from $246.1 million in 1998,
but declined as a percentage of net revenues to 10.8%.
Operating income was $283.9 million, or 12.3% of revenues, an
18.4% increase from first half 1998 levels of $239.7 million, or 11.5%
of revenues.
At July 3, 1999, shareholders' equity was $4,045.7 million; cash,
cash equivalents and marketable securities totaled $1,127.6 million;
long-term debt was $703.4 million (a large portion of which consists
of convertible debt). ST's net financial position was $319.7 million;
this result was achieved due to a strong improvement in net cash from
operating activities, which was $674.1 million in the first half of
1999, compared to $339.8 million in the same period a year ago.
Capital expenditures were $412.2 million in the 1999 first half,
compared to $453.6 million for the first six months of 1998.
Outlook
Looking ahead, Mr. Pistorio noted, "ST is in a strong competitive
position to take advantage of this positive phase in the industry
cycle. The basic structures for two new 8-inch modules in Rousset and
Agrate are equipment-ready. Once we were confident of the market
upturn, we accelerated our capital expenditures and have already
committed $1.2 billion for the year 1999, including the start up of
the two new 8-inch modules in Rousset (France) and Agrate (Italy).
This will provide ST with significant new capacity that will
materialize as of the first quarter of the year 2000, enabling
production to match market demand."
"In the short term, seasonal factors notwithstanding," Mr.
Pistorio added, "we anticipate that our market position within the
current environment will enable STMicroelectronics to post a
sequential increase in revenues in the third quarter of this year."
TECHNOLOGY, PRODUCTS AND DESIGN WINS
During the second quarter, the Company introduced a number of
major new products and concluded some strategic actions designed to
reinforce its world-class capability in a variety of key markets,
including audio, imaging technology, graphics and biometric security
systems.
In April, ST signed an agreement with VideoLogic plc designed to
bring a new level of graphics performance to the PC and Digital
Consumer markets by combining ST's excellence in manufacturing,
process technology and digital video with VideoLogic's successful
PowerVR 2D/3D graphics technology.
Also in April, ST and Altec Lansing Technologies, Inc. announced
the establishment of the ALST Technical Excellence Center in Israel to
develop joint technologies and systems solutions for the computer,
consumer and communications technology markets. Focusing initially on
audio-related applications, including enhanced multimedia speaker
systems, DSP-based speakers, RF solutions for high-quality audio
networking and voice recognition systems for both home control and
business PC systems, the ALST Center will reinforce ST's world
leadership in the field of audio integrated circuits, which has been
one of the Company's strengths for more than 30 years.
In May, ST made the first public disclosure of its innovative new
processor core, the ST100, which combines both microcontroller and
digital signal processor (DSP) features. The ST100 MCU-DSP core is
aimed at system-on-chip products in high volume applications such as
cellular phones, hard disk drives, printers, multimedia platforms and
broadband access modems. ST expects to deliver commercial products
containing this core in 2000. Embedded DSP technology is one of the
major driving forces in the microelectronics industry and with the new
ST100 ST reinforces a broad range of cores covering the needs of
traditional and emergent applications.
In the Digital Consumer field, ST recorded further successes,
especially in the Set-Top Box (STB) market. The important design wins
achieved during the quarter included a major Northern Europe set-top
box manufacturer, for both front-end and back-end chips, and Dassault,
which selected ST technology for its Canal+ STB. A major development
in the STB market was the announcement by BSkyB and OnDigital that
they will supply customers with free boxes, doubling the demand for
products for which the Company is the main supplier.
During the quarter, the Company began deliveries of one of the
world's first Microsoft TV-based High Definition TV (HDTV) set-top box
development platforms, code-named Orion-HD1, to major OEMs.
Capitalizing on the Company's unrivaled experience in delivering
silicon solutions for set-top boxes, the Orion-HD1 platform allows
set-top box OEMs to develop the next generation of boxes and consumer
applications running under Microsoft TV, including cinema quality
audio and video for TV, 3D gaming and Internet applications running
with high quality graphics. The Orion-HD1 was demonstrated on the
Microsoft stand at NCTA in June.
In May, ST signed an agreement with SAGEM, the world leader in
automatic fingerprint identification systems, for the joint
development of biometric solutions based on ST's proprietary TouchChip
technology that will allow sophisticated automatic fingerprint
identification to be applied in high volume consumer applications. The
products developed will meet the rapidly growing demand that is
anticipated for a low cost yet highly reliable means of verifying
personal identity as a way of controlling access to equipment such as
PCs, mobile phones and cars.
In the telecommunications field, significant results have been
achieved in both wireless and wireline applications. ST's innovative
Pegas.usB(TM) USB World Modem, for example, has been chosen by two
major PC makers, while at the Computex show ST presented a new USB
modem chipset that performs both fully fledged Asymmetric Digital
Subscriber Line (ADSL) and G.lite standards. ST has also booked orders
for 1999 deliveries of 1.6M ADSL modem kits, reinforcing its position
as the world's leading supplier of ADSL modem chipsets.
Because ST supplies two of the major cellular phone makers, the
extremely rapid growth of handset sales in this field has also fueled
outstanding demand for ST products. Additionally, the Company has
achieved important new design wins in this field, including one in
energy management for GSM phones and three in the area of short range
radio frequency circuits that are expected to generate revenues of
more than $100 million in the next two years. In Japan, ST achieved a
design win for an advanced RF front end for cellular phones.
In the $6.9 billion market for disk drive chips, ST introduced a
new generation read/write channel chip called Giorgione(TM) that is
capable of handling data at up to 425Mb/s -- an evolution of the
Bellini(TM) read/write channel already in volume production at a major
US drive maker, while new business in the field of printers included
fax machine, scanner and printer motor drivers for deliveries in year
2000. In the peripherals field, the Company also reports a number of
design wins in power management circuits, a field where ST now offers
advanced solutions for Pentium/Celeron processor supplies.
In the automotive field, ST has been awarded all of the Ford
Visteon business for audio power amplifiers, starting from model year
2001. ST has also delivered to several customers samples of its
Euterpe(TM) voice processor chip that includes a digital signal
processor core optimized for audio applications and adds voice
interface features to applications such as automotive systems and home
appliances. Euterpe voice processing, along with GPS navigation based
on an ST solution, is used in the integrated traffic information
system now being field tested on the Italian motorway network.
ST has also had major successes in the high growth market for
hardware that plays MP3 compressed music files, today the most common
standard for the interchange of high quality music through the
Internet. In the second quarter, the Company introduced an enhanced
version of the STA013, a DSP-based MP3 decoder chip which consumes
less than 90mW, extending the play time of a typical player to more
than eight hours with normal batteries; in December 1999 a further
evolution consuming less than 50mW will be introduced. The STA013 has
been designed in at several manufacturers of mobile MP3 players and
has also been designed in at Samsung for one of its cellular phones.
(TM) Pegas.usB, Tosca, Giorgione, Bellini and Euterpe are trademarks
of STMicroelectronics.
Some of the above statements are forward-looking statements that
involve a number of risks and uncertainties. In addition to factors
discussed above, among the other factors that could cause actual
results to differ materially are the following: general business and
economic conditions such as possible future financial turbulence; the
cyclicality of the semiconductor and electronic systems industries;
capital requirements and the availability of funding; competition;
excess or obsolete inventory and variations in inventory valuation;
new product development and technological change, including acceptance
of new products by particular market segments; manufacturing risks;
changes in customer order patterns, including loss of key customers,
order cancellations or reduced bookings; intellectual property
developments; international events and currency fluctuations; problems
in obtaining adequate raw materials on a timely basis; the loss of key
personnel; and the impact on the Company's business due to internal
systems or systems of suppliers and other third parties adversely
affected by year 2000 problems. Unfavorable changes in the above or
other factors listed under "Risk Factors" from time to time in the
Company's SEC reports, including the Prospectus dated June 5, 1998
could materially affect the Company.
STMicroelectronics (formerly SGS-THOMSON Microelectronics) is a
global independent semiconductor company, whose shares are traded on
the New York Stock Exchange, on the Bourse de Paris and on the Milan
Stock Exchange. The Company designs, develops, manufactures and
markets a broad range of semiconductor integrated circuits (ICs) and
discrete devices used in a wide variety of microelectronic
applications, including telecommunications systems, computer systems,
consumer products, automotive products and industrial automation and
control systems. Further information on ST can be found at www.st.com
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