STMicroelectronics Q1 Loss Sharply Narrows; Promotes Jean-Marc Chery To CFO

(RTTNews) - European semiconductor company STMicroelectronics NV (STM) reported Monday a loss for the first quarter that sharply narrowed from last year, despite a revenue decline, reflecting improved gross margins, lower expenses and fewer charges. The company also provided sequential revenue growth guidance for the second quarter.

Separately, the company announced the promotion of Jean-Marc Chery to chief operating officer, effective today. Chery was most recently serving as the executive vice president and general manager of embedded processing solutions or EPS, business. He will continue to report directly to President and CEO Carlo Bozotti.

Chery began his career in the Quality organization of Matra, the French engineering group. In 1986, he joined Thomson Semiconducteurs, which subsequently became ST, and held various management positions in product planning.

"First quarter revenue and gross margin results were well aligned with our guidance. The combination of a positive macro-economic environment and our leading-edge product portfolio helped to drive higher year-over-year revenues in Microcontrollers, Automotive, Industrial and Power, as well as in the Distribution channel," Bozotti said in a statement.

The Geneva, Switzerland-based Europe's biggest chipmaker reported a net loss of $24 million or $0.03 per share for the first quarter, sharply narrower than $171 million or $0.19 per share in the prior-year quarter.

Excluding items, adjusted net loss for the quarter was $13 million or $0.01 per share, compared to adjusted net loss of $116 million or $0.13 per share in the year-ago quarter.

On average, analyst polled by Thomson Reuters expected the company to report a loss of $0.03 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter declined 9.2 percent to $1.83 billion from $2.01 billion in the same period last year. Analysts had a consensus revenue estimate of $1.83 billion for the quarter. Revenues, excluding legacy ST-Ericsson products, edged up only 0.7 percent.

The company said the revenue growth was led by the microcontroller, memory, and secure MCU (MMS) and automotive (APG) product lines with revenue growth of 15.6 percent and 15.5 percent, respectively.

Region-wise, Greater China & South Asia posted revenue growth of 1.4 percent. while EMEA revenues decreased 4.4 percent and revenues in the Americas declined 8.6 percent. Japan & Korea revenues also decreased 34.9 percent, driven by a significant decrease in legacy ST-Ericsson products.

The company noted that its general-purpose microcontroller business enjoyed the fourth consecutive quarter of record revenues, with ST currently being the second largest player worldwide in microcontrollers, including both general-purpose and secure.

Gross margin for the quarter improved 150 basis points to 32.8 percent from last year's 31.3 percent, benefiting from the one-time licensing payment, manufacturing efficiencies and lower unsaturation charges, partially offset by price pressure.

Total operating expenses declined to $603 million from $909 million in the year-ago quarter, reflecting lower selling, general and administrative expenses as well as R&D expenses.

The company's sense & power and automotive products or SPA, revenues grew 5.7 percent from last year, led by growth in automotive or APG sales and industrial & power discrete or IPD, sales.

Meanwhile, EPS segment revenues declined 27.6 percent from last year, mainly due to the phasing out of legacy ST-Ericsson products and lower sales of set-top-box products, despite strong growth in microcontrollers.

Looking ahead to the second quarter, STMicroelectronics forecasts revenues to increase about 2 percent on a sequential basis, plus or minus 3.5 percentage points. The company also projects gross margin to be about 33.6 percent, plus or minus 2.0 percentage points. Street is looking for second-quarter revenues of $1.93 billion.

The company noted that its Supervisory Board is recommending to shareholders the approval of a $0.10 per share stable cash dividend for the second and third quarters of 2014 for approval at the 2014 Annual General Meeting of Shareholders.

"We are encouraged by the signs of improvement in the macro-economic environment generally and by specific product dynamics expected in the next several quarters. In the second quarter, we see opportunities to continue to expand our customer base, driven by strength in microcontrollers, automotive and industrial, and power applications and by the initial recovery of the Embedded Processing Solutions segment," Bozotti added.

STM closed Monday's regular trading at $9.21, up $0.10 or 1.10% on a volume of 2.28 million shares.