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To: Paul Engel who wrote (114271)	10/18/2000 7:01:42 AM
From: puborectalis	Read Replies (3) \| Respond to of 186894

STMicroelectronics 3rd-Qtr Profit Triples to $415 Mln (Update2) By Jad Mouawad Paris, Oct. 18 (Bloomberg) -- STMicroelectronics NV, Europe's biggest computer chipmaker, said third-quarter profit tripled as makers of mobile phones, digital cameras and pocket organizers snapped up its products. Net income rose to $415 million, or 45 cents a share, from $135 million, or 15 cents a share, in the year-ago period, the company said. Sales rose 60 percent to a record $2.04 billion. STMicroelectronics, like rivals such as Texas Instruments Inc. and Royal Philips Electronics NV, has benefited from surging demand for chips used in telecommunications and consumer electronics. Its shares fell even as STMicroelectronics said it expected sales to rise in the next quarter. ``Their results are extraordinary but they are in a cyclical industry,'' said Marc Renaud, who helps manage about $522 million at CCR Actions in Paris. ``The cycle will start to slow for ST, maybe not in the next two or three quarters, but it will.'' STMicroelectronics' shares fell as much as 6 percent, and recently traded down 2 percent at 49.3 euros, valuing the company at 43.7 billion euros ($37.3 billion). The stock has fallen 28 percent since Sept. 1, erasing this year's gains. Other chipmakers have also declined despite posting better- than-expected earnings as investors looked at the growth outlook. Philips, which yesterday reported third-quarter profit more than doubled, fell as much as 5 percent today. Intel Corp., which has lost half its value since Aug. 31, rose as much as 3 percent in Europe today from its U.S. close after the No. 1 chipmaker yesterday said third-quarter profit beat revised targets. Intel's shares dropped 22 percent last month after the company said it would miss sales targets because of slack demand in Europe. Growth STMicroelectronics said it expected fourth-quarter revenue will be higher than in the third-quarter. STMicroelectronics also repeated it aimed to beat overall semiconductor market growth next year, which it sees at between 25 and 30 percent. Dataquest Inc., a market researcher, said worldwide chip sales should jump 37 percent to $231 billion this year as semiconductor makers benefit from an industry-wide recovery following a three-year slump that ended in the late 1990s. The semiconductor market should grow more slowly in the next two years as chipmakers increase output to meet demand. Dataquest expects 28 percent sales growth next year and 14 percent in 2002. Dutch-registered STMicroelectronics has been focusing on its more profitable products, such as flash memory chips -- semiconductors that retain data when a device is turned off -- rather than the more basic chips found in personal computers. Pasquale Pistorio, chief executive since STMicroelectronics was formed from the merger of two French and Italian state-owned companies in 1987, has put the company at the forefront of such chips. To meet rising demand, STMicroelectronics is investing $3 billion to increase capacity this year and plans to continue investing ``significantly'' in 2001, it said in a statement. Raising Cash STMicroelectronics is also ``currently monitoring the conditions of the financial market,'' for ways to raise between $1 billion and $1.5 billion to fund investments, it said. The company declined to comment on how it would raise this money ahead of a conference call scheduled for 4 p.m. Paris time. ``With such a rapid growth, ST needs the money to expand,'' said Jacques-Antoine Bretteil, who helps manage about $200 million in stocks, including STMicroelectronics, at International Capital Gestion in Paris. ``Although their outlook is excellent, I'm afraid investors may not like'' any move to sell new shares. ``Nothing justifies their valuation today,'' said CCR's Renaud, referring to STMicroelectronics' stock price. ``It was completely ludicrous at 75 and still too expensive at 45.'' Renaud sold shares in the company at the beginning of the year and says he won't buy them again unless they fall to 25.3 euros. Gross margin, the percentage of sales left after costs of production are subtracted, was 47.3 percent, compared with 39.8 percent in the same period last year. ``As we move into the fourth quarter, ST's order rates and backlog remain strong, indicating that the fourth quarter will be another period of record financial performance,'' Pistorio said in a statement faxed to news agencies. The statement was confirmed by Jean-Yves Peigne, a STMicroelectronics spokesman. The company's net income topped the 38 cents a share estimate of five analysts polled by Bloomberg News. (Investors can watch a live broadcast of the company's conference call on the Internet at: webcast.themeetingson.com. The Web cast will be available till Nov. 18).