Credit Suisse Technology Conference

Transcription

1 Credit Suisse Technology Conference Carlo FERRO Chief Financial Officer

2 STMicroelectronics: A Global Semiconductor Company Sales by Region as % of YTD 2006 sales 13% North America 31% Europe 5% Emerging Markets* 26% Greater China 21% Asia Pacific 4% Japan 9 Month 2006 sales: $7.37 B 16 main production sites 16 advanced R&D centers 39 design and application centers Listed on NYSE, Euronext Paris, Borsa Italiana *India, Africa, Latin America, Middle East

3 Revenues by Market Segment Based on YTD 06 Sales = $7.4B Industrial 14% Automotive 15% +13.5% Y-o-Y Growth Computer 17% Wireless Applications +29% Automotive Applications + 9% Industrial Segment + 9% Consumer 16% 38% Telecom * The above chart estimates, within a variance of 5% - 10% in the absolute dollar amount, the relative weighting of each of the Company s target market segments

4 Strategic Actions and Profitability Drivers RESULTS ACHIEVED 9M06 vs 9M05 Revenues ST +13.5% > TAM +8.9% ST Regions: China +21%, Japan +27% Sales Expansion Redeployed 10% of R&D workforce R&D expenses flat in ($) R&D Focus EPS RONA Cash Flow Cost Reduction Annual savings of about $600M Euro exposure reduced Asset Management 2006 CapEx reduced $200M NAT accelerated to 1.17

5 ST Total Revenues Q306 Total Revenues = $2.51B +0.7% vs Q206; +11.8% vs Q305 US$M 9M06/9M05 = +13.5% Sequential Drivers Consumer Industrial Market Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306

6 Gaining Market Share ST vs Total Available Market (TAM*) ST outperforming the market! 15% 11.8% 13.5% 10% 9.3% 8.9% 5% 0% Q306 / Q305 ST TAM (WSTS) 9M06 / 9M05

7 Top 5 Semiconductor Companies By revenues in US$M 9M05 Rank 9M06 Rank Change in Rank Company Name 9M05 Revenue 9M06 Revenue Percent of Total 1 1 Intel 26,199 22, % 2 2 Samsung 12,520 13, % 3 3 Texas Instruments 7,729 9, % STMicroelectronics 6,492 7, % Toshiba 6,754 7, % By application in US$M Industrial (9M06) Wireless Communications (9M06) Automotive (9M06) 1 STMicroelectronics 1,043 1 Texas Instruments 4,955 1 Freescale 1,473 2 Intel 1,008 2 Qualcomm 3,299 2 Infineon 1,264 3 Renesas STMicroelectronics 2,556 3 STMicroelectronics 1,105 4 Texas Instruments Intel 1,829 4 Renesas Analog Devices Freescale 1,787 5 NXP 768 Source: isuppli

8 Positive Momentum: Key Customers and Regions New major key accounts 12 OEMs targeted: 6 in Asia 4 in US 2 in Europe Over $40 billion in semiconductor TAM Q306 sales up 47% Y-o-Y Mass Market Expansion Sales to customers outside traditional top 50: +15.7% for the first 9 months of 2006 Target over 40% of total sales Greater China Sales up 21% for the first 9 months of 2006 Japan Sales up 27% for the first 9 months of 2006

9 Consistent Investments in R&D FOCUSED on Effective and Efficient Spending US$M 1/3 R&D Cost is Process, 2/3 is Product % % % 200 Average R&D (% of Sales) = 16.8% % 0 Q105 Q205 Q305 Q405 Q106 Q206 Q306 16% R&D in $ as % of sales

10 Reducing Capital Intensity Capacity ownership is a competitive advantage Modular approach to invest driven by demand Partnership and manufacturing joint ventures Flexible use of silicon foundry: 2006 average about 10% of wafers out (45% in Advanced CMOS) 2006 CapEx Plan to be $1.6 Billion 3500 A $200 Million Decrease from Initial Plan 45% % % US$M 2000 AVG = 16% 30% % % % 0 10% e CapEx CapEx as % of Revenues

11 Quarterly Financial Performance (As reported, in US$M, except EPS amounts) Q305 Q206 Q306 Net Revenues 2,248 2,495 2,513 Gross Margin 34.1% 35.4% 36.0% Operating Margin 4.5% 6.8% 7.7% Net Income EPS Diluted Pre-tax restructuring charges RONA* (excluding restructuring) 5.3% 9.6% 10.0% *RONA is not a US GAAP measure and is considered by company management to be the key financial and economic metric to measure the return on invested capital. RONA as the ratio between the operating income (excluding impairment and restructuring charges) and average net assets used during the period. ST defines average net assets as average total assets net of total liabilities as reported in our consolidated balance sheet excluding all items related to our financial position such as cash and cash equivalents, marketable securities, short term deposits, bank overdrafts, current portion of long term debt and long term debt.

12 Operating and EPS Leverage (Diluted EPS as Reported) Q/Q Sales +3.8% GM +10 bps OpM* +110 bps EPS* +25% Q/Q Sales +3.9% GM +110 bps OpM* +350 bps EPS* +120% Q/Q Sales +6.3% GM +240 bps OpM* +380 bps EPS* +91% Q/Q Sales -1.1% GM -110 bps OpM* -240 bps EPS* -29% Q/Q Sales +5.6% GM Flat OpM* +160 bps EPS* +40% Q/Q Sales +0.7% GM +60 bps OpM* +40 bps EPS* +14% US$ Y/Y Q306 revenue +11.8%, EPS* +118% Q105 Q205 Q305 Q405 Q106 Q206 Q306 *Clean Operating Margin and EPS excludes estimated impact of restructuring charges

13 Gross Margin Progression* Price Price 34.1% Exchange Rate Product Mix Efficiency 36.0% 35.4% Exchange Rate Product Mix Efficiency 36.0% Non Recurrent Q305 Q306 Q206 Q306 * Not drawn to scale, box size approximates impact on gross margin

14 Cost Reduction Summary (As of September 30, 2006 in US$M) COGS Savings (Q106 to Q406 Annualized) Restructuring Initiative Estimated Total COGS Savings (approximate) Savings Achieved YTD Estimated Remaining Savings in (approximate) 6 restructuring $150 $95 $55 8 & 12 wafer cost reduction $60 $40 $20 Reduced depreciation $115 $45 $70 Headcount reduction $25 $20 $5 TOTAL $350 $200 $150 Restructuring Charges Restructuring Initiative Estimated Total Charges (approximate) Charges Incurred YTD Estimated Remaining Charges* (approximate) 6 restructuring $350 $310 $20 Headcount reduction $100 to $130 $82 $18 *Planned for Q406 and early 2007.

15 Operating Expenses Control Target Less than 28% of sales US$M 800 (As reported) 34% % % 28% 26% 0 24% Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Operating Expenses % of Sales

16 Product Segments: Operating Margin Trends Moving in the Right Direction! Groups (as a % of Q306 Sales) 15% Application Specific Group MPG 10% MPA ASG 5% 0% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Operating Margin 25% Micro, Power & Analog Group 10% Memory Product Group 20% 5% 15% 10% 0% -5% -10% 5% -15% 0% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Operating Margin -20% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Operating Margin

17 Net Operating Cash Flow*: a Solid Capital Structure NOCF* NOCF/Sales (%) % 7% 6% % US$M % 3% 2% 100 1% M % In US$M (end of period) 1 Oct Dec July Sept 2006 Total Assets 12,492 12,439 15,153 13,902 Cash and Cash Equivalents 1,767 2,027 3,895 2,559 Net Financial (Debt)/Cash *Non US GAAP measure defined as: Net cash from operating activities minus net cash used in investing activities excluding payments for purchase of and proceeds from the sale of marketable securities and short term deposits.

18 Outlook Q406 revenue growth to be in the range between -1% and +5% sequentially Q406 gross margin of about 37% +/- 1 percentage point FY06 CAPEX reduced to $1.6Billion Based on effective currency rate of about $1.265 = 1

19 Strategic Actions and Profitability Drivers FUTURE BENEFITS New major key accounts Mass market Japan and Greater China regions Coming wave of new products in high growth market segments R&D Focus Sales Expansion EPS RONA Cash Flow Asset Management Cost Reduction Annualized savings of $150M to come Depreciation down about $150M in 07 15% Wafer cost reduction Q406 vs Q407 CapEx/Sales target: low double digit % Inventory turns target: Outsourcing & partnerships

20 New Products: Cellular Communications ASIC business solid in RF, EM, DBB Digital Baseband design wins in 3G and 3.5G Digital Baseband: ramp-up January 2007 Energy management: new customer Application Processor Nomadik 8810: volume production with Tier-1 customers Nomadik 8815: multiple advanced multimedia phones Connectivity Bluetooth: overall > 70 design-ins in BT/EDR & BT/FM combos Bluetooth: volume production at 8 to 10M units per quarter Wireless LAN: b/g compact modules in volume production

21 New Products: Digital Consumer STB HD 7100 family: first to market with 90nm single-chip products 1M / quarter in 2006 ramping to 1M / month in 2007 Over 30 design-ins for H.264, VC1, MPEG4 for both SD & HD Serving all market segments: Satellite, Cable, Terrestrial, IP Next generation: first again with 65nm single-chip, available H107 Digital TV: market addressed with STB solutions (SD & HD) #1 in European with plug-in solutions Volume shipments to major Korean, Japanese and European manufacturers idtv: STD2000 in production now! Several design wins in Asia, 90nm samples available now Next generation low cost idtv: STD1000

22 New Products: Other Important Applications Hard Disk Drive ST is the only company capable to supply the complete system solution 90nm SoC in production H207; targeting 65nm SoC samples in Q107 Motor Controller: #1 supplier WW with >40% market share Printers ASIC: 5 new design-wins awarded during 2006 ASSP: SPEAr, first configurable SoC (inkjet & laser), released to full production and shipping; new developments in 90nm & 65nm to cover additional markets Automotive In-vehicle TV: Nomadik platform supporting T-DMB and DVB-H Innovative applications: Advanced Driver Assistance, Integrated Safety Complete system solutions for China and Asia-Pacific Industrial & Multi-segment Focus on Advanced/High Performance Analog applications Expanding into emerging applications: Medical, Security, Photovoltaic Innovative key products: Sensors (MEMS, Pressure & Temperature)

23 COGS Reduction Dynamics: 2007 Singapore 6 learning curve Agrate 8 volume saturation Singapore 8 saturation and technology migration Crolles2 12 capacity expansion and cost improvement NAND wafers from Wuxi JV at cost Depreciation roll-off of about $150 million* CONTINUED WAFER COST REDUCTION BY ABOUT 15% IN 2007 *Based on effective currency rate of about $1.265 = 1

24 Strategic Vision ST will be in the top league of semiconductor companies with global leadership in: Power applications: Automotive, Industrial, Power Supply, Motor Control Multimedia convergence solutions: Wireless and Consumer Platforms Computer Peripheral Applications

25 Generating Shareholder Value: RONA Committed to increase RONA well above our WACC 15% 10% Return on Net Assets OPERATING MARGIN 11% -15% x NET ASSET TURNS = RONA 12% - 20% 5% 0% Q105 Q205 Q305 Q405 Q106 Q206 Q306 *RONA is not a US GAAP measure and is considered by company management to be the key financial and economic metric to measure the return on invested capital. RONA as the ratio between the operating income (excluding impairment and restructuring charges) and average net assets used during the period. ST defines average net assets as average total assets net of total liabilities as reported in our consolidated balance sheet excluding all items related to our financial position such as cash and cash equivalents, marketable securities, short term deposits, bank overdrafts, current portion of long term debt and long term debt.

26 Disclaimer This presentation may include statements that are not historical facts and are statements of future expectations and may include other forward looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended) that are based on management's current views and assumptions and that involve known and unknown risks and uncertainties that could cause actual results or performances to differ materially from those in such statements. In particular the following important factors could cause actual results to differ materially from the expectations of the Company or its management: (i) future developments in the world semiconductor market, in particular the future demand for semiconductor products in the key application markets and from key customers served by our products, (ii) pricing pressures, losses or curtailments of purchases from key customers, (iii) the financial impact of inadequate or excess inventories if actual demand differs from our anticipations, (iv) impact of foreign currency fluctuations, in particular a weakening of the U.S. dollar compared to the euro, (v) our ability to be successful in our strategic research and development initiatives to develop new products to meet anticipated market demand, as well as our ability to achieve our corporate performance roadmap by timely and successful completion of our other various announced initiatives to improve our overall efficiency and financial performance, (vi) anticipated benefits of research and development alliances and cooperative activities, (vii) the ability of our suppliers to meet our demands for products and competitive pricing, (viii) changes in the economic, social or political environment, as well as natural events in the counties where we and our key customers operate, (ix) Changes in our overall tax position as a result of changes in tax laws or the outcome of tax audits, (x) product liability or warranty claims for a product containing one of our parts, (xi) our ability to obtain required licenses on third party intellectual property and the outcome of litigation. Unfavorable changes in any of the above or other factors listed under Risk Factors noted from time to time in the Company s SEC reports including the Form 20F, most recently filed on March 3, 2006, and the Company s press release dated October 24, 2006, could materially affect the Company.

27 Q&A