Despite Positive Growth for Power, STMicro Reports Declining Revenue

STMicroelectronics, Inc. reported financial results for the fourth quarter and full year ended December 31, 2013 including fourth quarter net revenues of $2.01 billion, gross margin of 32.9%, and net loss of $0.04 per share. For the full year net revenues totaled $8.08 billion, gross margin was 32.3%, and net loss was $0.56 per share. Overall, net revenues as reported increased 0.1% sequentially and decreased 6.8% on a year-over-year basis. On a sequential basis by region of shipment, Greater China & South Asia posted growth of 4.1%, while Japan & Korea, the Americas, and EMEA decreased by 5.6%, 2.8%, and 1.0%, respectively.

“Fourth quarter revenue and gross margin results were well in line with our outlook range, coming in at the mid-point of our guidance, which translated into positive operating income before impairment and restructuring and a substantial positive free cash flow,” said ST President and CEO Carlo Bozotti.

Sense & Power and Automotive Products (SP&A) fourth quarter net revenues increased 2.3% sequentially. SP&A revenues increased 4.2% compared to the year-ago quarter driven by APG and IPD. SP&A operating margin was 7.7% in the 2013 fourth quarter compared to 6.2% and 9.0% in the prior and year-ago quarter, respectively, with the sequential increase principally driven by product mix.

Embedded Processing Solutions (EPS) fourth quarter net revenues decreased 3.2% sequentially. EPS decreased 19.4% on a year-over-year basis mainly reflecting the progressive phase-out of WPS (former ST-Ericsson products). EPS segment operating margin was a negative 8.5% in the 2013 fourth quarter compared to negative 2.2% (or negative 11.5% excluding the gain from the sale of businesses) and negative 18.9% in the prior and year-ago quarter, respectively.

Overall fourth quarter gross profit was $662 million and gross margin was 32.9%. On a sequential basis, gross margin increased 50 basis points, primarily due to manufacturing efficiencies partially offset by negative currency effects and, as anticipated, unsaturation charges.

R&D expenses were $407 million in the fourth quarter representing a sequential decrease of $16 million or 3.7%, primarily due to ongoing cost reduction initiatives partially offset by the unfavorable seasonality effect. R&D expenses decreased 30% compared to $585 million in the year-ago period.

SG&A expenses were $249 million in the fourth quarter decreasing $4 million or 1.5% on a sequential basis mainly due to ongoing cost reduction initiatives partially offset by the unfavorable seasonality effect. SG&A expenses decreased 14% compared to $291 million in the year-ago period.

Fourth quarter operating income, before impairment and restructuring charges, was $18 million compared to $54 million in the prior quarter, which included an $80 million gain from the sale of businesses. Operating margin in the fourth quarter, before impairment and restructuring charges, was 0.9% with Sense & Power and Automotive (SP&A) operating margin at 7.7% and Embedded Processing Solutions (EPS) at negative 8.5%. Operating margin improved from negative 6.5% in the year-ago quarter mainly due to the split up of ST-Ericsson.

Fourth quarter net loss was $36 million or $(0.04) per share, compared to a net loss of $(0.16) and $(0.48) per share in the prior and year-ago quarter, respectively. On an adjusted basis, ST reported a non-U.S. GAAP net loss per share estimated at $(0.01) in the fourth quarter excluding impairment and restructuring charges, net of estimated income tax effect, compared to a net loss estimated at $(0.03) and $(0.11) per share in the prior and year-ago quarter, respectively.

Bozotti continued; “In 2013, we grew 3.2% excluding the former ST-Ericsson products, a better performance than our served market, with the main contributions coming from our microcontrollers and automotive products. We also made good progress on our customer diversification and mass market and distribution initiatives. In addition, our leading-edge set-top box products and FD-SOI-based ASICs led to important design wins and traction with major worldwide operators and OEM customers.

“We made solid progress in executing the strategy we announced in December 2012 but we still have much to accomplish. We completed the split up of ST-Ericsson in a timely manner and by adding some of their competencies we strengthened our product development teams. Furthermore, we brought our quarterly operating expenses down by about 25 percent compared to the year-ago quarter and our fourth quarter net operating expenses within our target range. We also started to make gradual structural changes to our manufacturing footprint which will benefit our gross margin and we announced a key frame agreement with the French government to support our R&D efforts for CMOS derivative technology, concluded Bozotti.”