Electronics Production | October 24, 2007
ST profit down in Q3
STMicroelectronics reported financial results for the third quarter and nine months ended September 29, 2007.
Net revenues for the third quarter increased 6.1% sequentially to $2,565 million from the $2,418 million reported in the prior quarter, with growth led by application-specific wireless and computer products. Excluding FMG, net revenues also increased 6.1% sequentially. In the 2007 third quarter, following a comprehensive review of employee benefit plans, the Company revised its accounting for a seniority award program existing at a large affiliate since 1986. Historically, charges were expensed when incurred and are now accrued over the service period of the employee. In connection with this change the Company incurred a one-time, non-cash, pre-tax charge for past periods of about $21 million, of which more than $7 million are in cost of goods sold, more than $8 million are in R&D and nearly $5 million are in SG&A expenses. This revision to methodology had no material impact on prior periods. Gross profit was $902 million for the 2007 third quarter and the gross margin was 35.2%. Before the seniority program charge, gross margin was 35.5%. Sequentially, both gross profit and gross margin improved from the prior quarter levels of $838 million and 34.7%, respectively. Excluding FMG, gross profit was $865 million for the 2007 third quarter, representing a gross margin improvement to 39.1%, compared to 37.8% in the second quarter. Gross margin improvement in the quarter reflected better mix and manufacturing performance, while only incorporating a portion of the recent exchange rate degradation. In the year-ago quarter, the gross profit for the entire Company was $904 million and the gross margin was 36.0%.
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