Gottfried, STMicroelectronics to double its capital spending this year. I love those free spending Europeans. Jeff
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COMPANIES & FINANCE: EUROPE: STM boosted by demand for chips
90% match; Financial Times ; 19-Apr-2000 12:00:00 am ; 344 words
STMicroelectronics, the Franco-Italian semiconductor manufacturer, may nearly double its capital investment this year as it seeks to exploit unprecedented demand for chips.
Pasquale Pistorio, president and chief executive, said that investment would certainly be above Dollars 2bn and possibly more than Dollars 2.5bn.
"Last year we invested Dollars 1.4bn - this year will be much, much bigger, maybe surpassing Dollars 2.5bn," he said.
The STM president believed that the market conditions that have helped the company's market value soar would remain favourable for chipmakers for some time yet.
"I believe that the years 2000 and 2001 are extremely solid," he said. "Probably also 2002. And maybe even 2003. This depends on how fast capital investment is (across the industry)."
So far there was no sign of the sort of "big wave" of investment likely to end the good times. "The information we have is that industry investments are in the range of 20-22 per cent of sales, which is quite moderate," he said. While capital investment was in this range, there had, in past industry cycles, been no risk of overheating. "When it goes into the high 20s, then the risk of overheating exists."
This is shaping up to become a record year for the industry, with rapid growth in the internet, mobile communications and new consumer electronics products driving demand for chips. Worldwide sales jumped 33 per cent in February, according to the Semiconductor Industry Association.
Mr Pistorio's comments came as STM posted an eye-catching 127 per cent advance, from Dollars 105.1m to Dollars 238.4m, in first-quarter net income on revenues ahead almost 53 per cent to Dollars 1.7bn. The gross margin was 42.1 per cent, up from 38.4 per cent a year earlier.
He said the company had ended the period with a record backlog and record incoming order rates. He predicted further gross margin expansion in the second quarter.
"At the end of this year versus the end of last year, we should have an internal capacity 30-35 per cent bigger in terms of wafer output," he added. The main driver of the industry's recovery was the internet.
The shares ended in Paris up 3.4 per cent at Euros 190.2, more than double the increase on the benchmark CAC 40 index.
STM was the best-performing CAC 40 stock of 1999, registering an increase of more than 350 per cent. It ended the year as one of the top 10 French companies by market capitalisation.
Copyright ¸ The Financial Times Limited |
