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Electronics Production | January 28, 2009

ST to lay off 4500 worldwide

European chipmaker STMicroelectronics seeks to reduce costs by over $700 million in 2009 in respect to the Company’s fourth quarter 2008 cost base. The actions are a combination of the ongoing restructuring initiatives and new programs, expected to affect about 4,500 net jobs worldwide in 2009.
ST reported 4Q net revenues of $2.276 billion compared to $2.696 billion in he 3Q and $2.742 billion in the same period 2007. Fourth quarter net operating cash flow was at $153 million, while 4Q operating loss amounted to $139 million (net loss of $366 million). Full year net revenues was at $9.84 billion, compared to 2007 revenues of $10.0 billion. Net loss amounted to $786 million in 2008, compared to a net loss of $477 million in 2007.

Mr. Bozotti stated, “While it is extremely difficult to predict how the industry will evolve in 2009, we believe it could be a year of fundamental change and opportunity".

The chipmaker has issued the following restructuring and savings plans for 2009:
- First, 2009 will be a year focused on improving our competitiveness as we execute on our plan to complete the wireless joint venture with Ericsson Mobile Platforms during the first quarter.
- Second, we are targeting to reduce our costs by over $700 million in 2009 in respect to the Company’s fourth quarter 2008 cost base. The actions are a combination of the ongoing restructuring initiatives and new programs that are focused on resizing the Company’s manufacturing operations and streamlining expenses, and are expected to affect about 4,500 net jobs worldwide in 2009.
- Third, the company continues to advance our lighter asset strategy focused on careful management of the capital investments. As a result, STM has set a capex budget of about $500 million for 2009, representing a 50% reduction in comparison to 2008.
- Fourth, thanks to the strong and consistent investment in its product portfolio the company is in a solid position to provide innovative products that will continue our momentum by driving the Company to gain market share in 2009 just as we have in 2008.”

Current uncertainty in the global financial markets, economic recession in one or more of the world’s major economies, seasonality, and the effect on demand for semiconductor products in the key application markets and from key customers served by our products makes it extremely difficult to accurately forecast product demand and other related matters and makes it more likely that ST’s actual results could differ materially from expectations. Consequently, the Company will only provide approximate revenue and gross margin internal planning targets with respect to the first quarter of 2009.

When visibility on market conditions improve, the Company will reconsider providing quantitative guidance similar to past practices. In the meantime and for internal purposes, the Company is currently planning for revenues to be in the range of $1.5 billion to $1.85 billion. As ST works to reduce inventory levels during this timeframe, fab loading will run at levels of about 50%, driving gross margin to a extraordinary low level which the Company is planning for internal purposes to be in the mid to high 20s as a percentage of sales. Gross margin is subject to changes in demand levels and pricing that could impact fab loading, inventory write-offs, mix and unit costs, and combined with currency fluctuations potentially create additional margin variability.
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December 12 2018 6:25 pm V11.10.11-1