STMicroelectronics NV (STM) reported fourth quarter 2009 earnings from continuing operations of 4 cents per share, beating the Zacks Consensus Estimate of 2 cents.
ST’s net revenues for the fourth quarter of 2009 total $2,583 million and include sales recorded by ST-Ericsson as consolidated by ST. Net revenues increased 13.6% sequentially, reflecting an increase in demand across all of ST’s served market segments, as well as in all regions, with particular strength in Japan, Greater China and the Americas. Net revenues increased in comparison to the year-ago quarter in all market segments except Consumer and Industrial, and in all regions except Japan, reflecting the broad-based recovery in the semiconductor market.
On a sequential basis, all market segments posted growth, with Computer increasing by 22%, Industrial by 19%, Automotive by 19%, Consumer by 12% and Telecom by 1%. Distribution increased 35%, reflecting strong demand and improving market conditions.
Gross margin in the fourth quarter of 2009 was 37.0%, significantly higher than the 31.3% reported in the third quarter of 2009, due to higher volumes, increased fab loading and improved efficiencies.
In the fourth quarter, ST continued certain ongoing restructuring activities and headcount-reduction programs to streamline its cost structure. Related to the Company’s cost-realignment initiatives, ST posted fourth quarter restructuring and impairment charges of $96 million, of which $61 million are related to ST-Ericsson.
Segment Overview
ACCI (Automotive/Consumer/Computer/Communication Infrastructure Product Groups) fourth quarter net revenues increased 17% sequentially to $997 million, mainly driven by automotive, set-top box and computer peripherals and reflected solid holiday sales and continuing improvement in industry conditions. In a significant turnaround, ACCI returned to profitability in the fourth quarter.
IMS (Industrial and Multisegment Product Sector) fourth quarter net revenues increased 23% sequentially to $854 million, driven by strong growth in microcontrollers, analog, smartcards and power discretes and reflected improved market conditions and solid growth in the multi-segment market and in distribution.
Wireless net revenues in the fourth quarter increased 1% sequentially to $712 million. Net revenues were driven by continued demand in China. Wireless operating loss in the fourth quarter narrowed to $48 million benefiting from the ongoing cost restructuring plans.
Product Innovation
During 2009 ST introduced 32-bit microcontrollers for industrial, Smartcards and the automotive markets and we are making very good progress here. We have extended our success in 32-bit low power MCUs applications by expanding our range of STM 32 micros with new families including the STM 32 connectivity line and recently we achieved an industry first for devices based on the ARM Cortex-M processor cores with new microcontrollers featuring 90 Nanometer embedded flash. The company remains focused on delivering the energy efficient platforms and recently demonstrated 11 new products including its next-generation recorders which include its 3D video and graphics ready devices.
It has introduced many novelty devices that can save power and increase energy efficiency in a broad range of application. It has developed chips to preserve battery life in mobile products produce advanced power transistors that can significantly improve power velocity and efficiency power supply. Its MEMS division has aggressively expanded its leadership introducing new families of gyroscopes, accelerometers and active microphones. MEMS offer significant opportunities for the company as they target and are being designed to win a wider base of customers and very high volume applications.
Balance Sheet and Cash Flow
Net operating cash flow, excluding M&A transactions, was $221 million for the fourth quarter of 2009. Capital expenditures were $190 million during the fourth quarter of 2009, compared to $98 million in the prior quarter and $206 million in the year-ago quarter.
Inventory was $1.28 billion at quarter end, down from $1.30 billion at September 26, 2009 and $1.84 billion at Dec 31, 2008. Inventory turns in the fourth quarter improved to a record 5.1 turns compared to 4.8 turns sequentially and 3.1 turns in the year-ago quarter.
ST’s cash and cash equivalents, marketable securities (current and non-current), short-term deposits and restricted cash equaled $2.91 billion. ST’s net financial position improved significantly to a net cash position of $420 million at Dec 31, 2009 compared to a net debt position of $545 million at Dec 31, 2008.
Outlook
For the first quarter of 2010, the company expects normal historical revenue pattern leading to a sequential decrease in net revenues between about 7 and 15% which corresponds to 35% to 45% growth when compared with a year ago period. Its Q1 is in terms of calendar days about 10% shorter than Q4.
STMicroelectronics N.V., an independent semiconductor company, together with its subsidiaries, designs, develops, manufactures, and markets semiconductor products used in various microelectronic applications, including automotive products, computer peripherals, telecommunications systems, consumer products, industrial automation, and control systems. Major competitor is Texas Instruments Inc. (TXN).
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