STMicro to exit select IC markets

STMicroelectronics reported financial results for the fourth quarter and year ended December 31, 2004. Net revenues for the fourth quarter were $2,328 million, up 4.3% sequentially from the $2,231 million reported in the prior quarter, and 10.2% above the $2,113 million in last year’s fourth quarter. Revenues from Application Specific Products were $1,217 million, or 52% of 2004 fourth quarter net revenues. Gross profit was $852 million, up about 1% sequentially from the prior quarter’s $845 million and 12.1% above last year’s fourth quarter gross profit of $760 million. Gross margin was 36.6%, below the prior quarter’s 37.9% and above the 36.0% reported for last year’s fourth quarter. Net revenues for the year ended December 31, 2004 were $8,760 million, an increase of 21.0% over the $7,238 million recorded in 2003. Gross profit was $3,228 million, or 36.8% of net revenues, compared to $2,566 million or 35.5% in 2003. Operating income was $683 million, or 7.8% of net revenues, compared to $334 million or 4.6% of net revenues in 2003. Net income for 2004 was $601 million. In the prior year, net income was $253 million. Telecom, which showed a slight sequential improvement in the prior quarter, delivered the biggest sequential gain in the fourth quarter. Automotive and Computer also posted strong sequential increases in the fourth quarter. Consumer, which had the strongest sequential increase in the third quarter posted, along with Industrial & Others, seasonal sequential declines in revenue of 12% and 5% respectively. “In addition to earlier-stated strategic initiatives, the Company is undertaking several near-term actions to improve financial performance. First, the Company plans to eliminate certain low volume, non-strategic product families whose return on net assets in the current environment does not meet internal targets. In particular, the Company will scale back the Access programs focused on Customer Premises Equipment (CPE) modem products. This effort will result in impairment charges of approximately $60 million in the first quarter. Second, the Company will accelerate cost reduction initiatives, including: a more selective process in dedicating capacity to new orders, with priority to higher margin products; optimization of the product and production mix in memory; consolidation of certain central function activities to control overhead; and launching an aggressive cost savings program focused on purchasing”, said Pasquale Pistorio, president and chief executive, in a statement. “With respect to the first quarter, we believe it is prudent to anticipate a decline in both revenues and gross margin due to seasonal dynamics, coupled with continued pricing pressures across many of ST’s product families as a result of the industry-wide over-inventory situation, lower utilization rates, as well as the negative impact of the weaker U.S. dollar. Specifically, we expect first quarter revenues to decrease 4% to 12% in comparison to the 2004 fourth quarter and anticipate a gross margin of about 34%, plus or minus 1 percentage point. Our outlook is based upon an exchange rate of $1.32 to 1 Euro. Currency impact represents approximately 140 basis points of the anticipated sequential gross margin decline.”