STMicroelectronics saw sales increase 14 per cent sequentially to $2.27 billion in the third quarter of 2009, as sales of the computers and cars that use the company’s microchips began to pick up again.
STM’s third-quarter loss – its seventh in a row – narrowed despite a double-digit revenue decline on smaller one-time items.
Shares rose 3.7 per cent to $10.10 in after-hours trading as revenue came in just above the high end of the company’s expectations, although the loss was bigger than Wall Street expected. The stock, which reached its 52-week high last week, has more than doubled from a 14-year low in March.
The semiconductor company forecast fourth-quarter revenue slightly above seasonal trends and said the worst of the economic crisis is behind it.
Chief Executive Carlo Bozotti said third-quarter results were in line with expectations, “with strong sequential sales growth, a significant reduction in our inventory and continued improvement in operating cash flow”.
He noted that growth “restarted” in America and Europe and was strong in Asia Pacific and Greater China. Computer and automotive markets grew fastest of all market segments in the latest quarter, he added.
Swiss-based STM, which supplies chips for the handset, computing, automotive and industrial sectors, has seen improving markets, but the dollar’s weakness hurts STM’s margins because the company, formed by the merger of French and Italian state-owned chip makers in 1987, has a large European cost base but generates most of its revenue in dollars.
Sales came in at the top end of the French-Italian company’s estimates, although still down 15 per cent from the same period last year.
Sales of microchips came to an almost complete halt last winter, as the credit crunch led people to put off purchases of new goods such as mobile phones, music players and computers. Now most of the excess inventory has been sold off, and companies like STM are returning to growth. US rival Intel set the tone last week by reporting better earnings than expected.
In the latest quarter, STM reported a loss of $201 million, or 23 cents a share, compared with a year-earlier loss of $289 million, or 32 cents a share.
The latest results included $53 million in restructuring and other charges and a $44 million loss on equity investments. The prior-year quarter included a $344 million charge related to the spin-off of the flash-memory segment into a venture with Intel Corp.
Excluding items, the loss was 17 cents a share. Analysts expected a loss of 9 cents, according to a poll by Thomson Reuters.
Revenue dropped 16 per cent to $2.28 billion. In July, STMicro predicted revenue between $2.07 billion and $2.27 billion.
Gross margin fell to 31.3 per cent from 35.7 per cent, in line with the company’s forecast of about 31 per cent, on lower volumes, charges for unused capacity, manufacturing inefficiencies and lower prices.
Revenue decreased in all segments and in all regions except Asia Pacific because of the weak economy.
Looking ahead, STM expects fourth-quarter revenue growth between five per cent and 12 per cent from the third quarter, to a range of $2.38 billion to $2.54 billion. Analysts expected $2.41 billion.
Separately, ST-Ericsson, a venture between STM and L.M. Ericsson Telephone Co., reported a narrower operating loss of $112 million and revenue up 9.3 per cent to $728 million from the second quarter.
The wireless-chip venture, which started operating in February, is planning restructuring that will cut costs by $230 million and reduce its work force by 1,200 of roughly 8,000. The plan is expected to be completed by the second quarter of next year.