Q Financial Results

Transcription

1 Q Financial Results

2 STMicroelectronics Global Presence* Q108 Revenues = $2.48B Q108 Revenues (ex Flash) = $2.18B 12% North America Carrollton Phoenix Malta Morocco 30% Europe 25% Greater China France (Crolles I & II, Rousset, Tours) Italy (Agrate, Catania) China 21% Asia Pacific 15 main production sites 16 advanced R&D centers 39 design and application centers 78 direct sales offices in 36 countries Listed on NYSE Euronext (New York & Paris), Borsa Italiana Malaysia 7% Emerging Markets** Singapore 5% Japan * Sales by region of destination as % of Q108 sales ** India, Russia, Africa, Latin America, Middle East 2

3 ST s Targeted Segments: Focusing on Fast Growing Markets Communications Digital Consumer Automotive 2007 Rankings*: #1 Industrial #3 Wireless #3 Automotive #4 Digital Consumer Computer Peripherals * isuppli 2007 rankings Industrial 3

4 ST Total Revenues Q108 Revenues = $2.48B -9.6% vs. Q407; +8.9% vs. Q107 Q108 Revenues (ex Flash) = $2.18B -8.6% vs. Q407; +11.6% vs. Q107 2,800 2,400 US$M 2,000 1,600 1, Q105 Q205 Q305 Q405 ST Revenues Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 ST Revenues (excludes Flash) 4

5 Revenues by Market Segment Total ST Q108 Sales: $2.48B 35% 16% 31% ST w/o Flash Q108 Sales: $2.18B 18% 16% 17% 16% 17% 17% 17% Automotive Computer Consumer Industrial 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 5

6 Revenues by Product Segment Excluding Flash ASG: -8.4% Q/Q, +14.2% Y-o-Y Y-o-Y growth driven by wireless, consumer (including Genesis) and auto IMS: -8.7% Q/Q, +7.1% Y-o-Y Y-o-Y growth driven by MEMS, microcontrollers and advanced analog 2,500 2,000 US$M 1,500 1, Q105 Q106 Q107 Q108 Q205 Q206 Q207 Q208 (est.*) Q305 Q306 Q307 Q405 Q406 Q407 * Based on mid-point of company guidance ASG IMS Other 6

7 Core Businesses Lead Growth In US$M ST FMG ST w/o FMG Net Revenues Q108 $2,478 $299 $2,179 Net Revenues Q407 $2,742 $358 $2,385 Q108 sequential growth -9.6% -16.5% -8.6% Q108 Y-o-Y growth +8.9% -7.4% 11.6% 7

8 Key Customers & Regions Q108 Results Excluding Flash Strong Y-o-Y improvement in all key sales initiatives on top of steady growth (+6%) of traditional strategic partners New Major Key Accounts Japan Sales: -2% sequentially +48% Y-o-Y Sales: +5% sequentially +28% Y-o-Y Mass Market Greater China Sales: +3% sequentially +23% Y-o-Y Sales: -20% sequentially +14% Y-o-Y 8

9 New Products: Wireless 3G Digital Base Band 3X growth expected in 2008 ST continues to be a strategic partner to EMP in technology nodes beyond 90nm Application Processor Significant ramp in mobile phone and automotive applications Connectivity WLAN handset market share >30% Bluetooth handset market share from standing start to >10% in 2 years ST connectivity products designed-in >150 phones; over half on the market today Introduced 65nm BT+FM (Rx/Tx) combo chip Ramping up Bluetooth headsets 9

10 MORE New Products Digital Consumer Set-top Box Strong H.264 (SD/HD) sales; transition from MPEG-2 to H.264 will continue throughout 2008 Introduced STi7111: single-chip HD decoder with integrated demodulator, designed to meet the requirements of major satellite operators worldwide Digital TV Addressing market with STB plug-in solutions (SD/HD) Introduced DTV150: cost optimized idtv platform Acquired Genesis; integrating image and video processors into ST s product offering Computer Peripherals Data Storage 90nm SoC ramping in volume now 65nm SoC design win from a world-leading HDD OEM utilizing ST s IP for SATA, production in 2009 Printers New design wins in Japan and Korea for SPEAr processor 10

11 MORE New Products MEMS Solid positioning in Gaming, supplying sensors for Nintendo Wii Serving a differentiated customer base 3 new important design-wins for motion sensing accelerometers for mobile consumer products Industrial Advanced analog: design-wins for real-time clock chips (medical, server & computer peripheral applications) and digital output temperature sensors Power conversion: design-wins in smart-power converters for products as different as induction cookers to audio applications Automotive Nomadik-based Cartesio: embedded-gps application processor for navigation will enable several products from Garmin New design-wins in powertrain and car body applications (Alternator IC for emerging market; LED drivers ASIC s from European and US OEMs) 11

12 Financial Performance In US$M, except EPS Q107 Q207 Q307 Q407 Q108 Net Revenues 2,276 2,418 2,565 2,742 2,478 Gross Margin 34.5% 34.7% 35.2% 36.9% 36.3% Operating Expenses / Sales (excluding in-process R&D in Q108) 30.6% 29.6% 27.8% 28.3% 31.9% Operating Margin* (before impairment & restructuring & excluding one time) 3.2% 5.5% 9.1% 9.6% 4.7% Net Income EPS Diluted (before impairment & restructuring & excluding one time) Pre-tax restructuring & total impairment charges *Accounting for Assets of Flash Memory Business Held for Sale started in June

13 Financial Performance ST (ex FMG) In US$M Q107 Q207 Q307 Q407 Q Net Revenues 1,953 2,086 2,213 2,385 2,179 Gross Margin 37.0% 37.8% 39.1% 38.2% 37.6% Operating Margin* (before impairment & restructuring & excluding one-time) 4.6% 7.6% 12.1% 10.0% 4.6% RONA** 5.2% 9.1% 14.0% 13.3% 5.4% Effective Exchange Rate / $ *Q108 proforma operating income excludes impairment and restructuring charges and $21 million in one-time in-process R&D expenses related to the acquisition of Genesis. **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 and in-process R&D 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. 13

14 Q108 Year over Year Comparison: EBIT before Impairment, Restructuring & In-process R&D* US$M % of incremental revenues (ex FMG) Q Operating Income* Share-based Compensation Currency Genesis FMG net Operating Improvements Q Operating Income* * Q and Q Operating Profit respectively, before impairment, restructuring and in-process R&D charges of $12 million and $204 million (of which $166 million is related to FMG) 14

15 Currency Impact on EBIT Significant strength in the Euro continues to mask our operating performance improvements US$M +30% Q Q Q108 EBIT* Estimated Y/Y FX Impact Effective Exchange Rate ($ to Euro) *Proforma EBIT excludes Impairment, Restructuring and In-process R&D charges. Q107 is reported EBIT of $62 million (+ $12 million in impairment & restructuring charges); Q108 is reported EBIT of -$88 million (+ $183 million in impairment & restructuring charges and $21 million in one time in-process R&D expenses from the acquisition of Genesis). 15

16 Operating Expense Control (As reported in US$M) Q108 operating expenses Y-o-Y reflect: +$72M in currency effects; incremental +$12M in stock-based compensation charges Incremental expenses related to Genesis impact prior to realization of identified synergies Combined operating expense target 28% of sales % % 30% 28% 0 26% Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108* R&D SG&A % of Sales *Q108 excludes $21M of one-time in-process R&D related to the acquisition of Genesis 16

17 Product Segments (ex Flash): LTM Revenue & Operating Results In US$M ASG IMS Last 12 months Sales $5,611 $3,189 Last 12 months Operating Income $312 $453 Last 12 months Operating Margin 5.6% 14.2% 17

18 Reducing CapEx to Sales Ratio Increasing use of silicon foundry: Approximately 13% of wafers out; ex-flash about 7% Approximately 50% of advanced CMOS outsourced Partnership and manufacturing joint ventures IBM Alliance Continued rationalizing of manufacturing operations 45% 40% 35% 30% 25% ST Average = 26% 20% 15% 10% 5% Avg.=16% 07= 11.4% 2008e 10% 0% e CapEx as % of Revenues 18

19 Generating Cash US$M Net Operating Cash Flow* % 8% % % 2% 0 0% Q107 Q108 NOCF* NOCF/Sales (%) NOCF* (ex Genesis) *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.

20 Balance Sheet Highlights End of period In US$M 1 April 2007 w/o FMG 31 Dec w/o FMG 30 March 2008 w/o FMG Total Assets 14,200 14,272 15,334 Shareholders Equity 9,862 9,573 9,838 Cash and Cash Equivalents 3,030 3,488 3,709 Net Financial (Debt)/Cash Position 917 1,268 1,085 Inventory Turns 3.6x 4.1x 3.8x 4.4x 3.5x Net Asset Turns

21 2008 Portfolio Management Actions Completed acquisition of Genesis To improve DTV product positioning ST, Intel and Francisco Partners created Numonyx To establish a Flash memory leader ST and NXP announced the creation of strong #3 player in wireless semiconductors ST teams with NXP to join their respective growing and profitable wireless assets for the creation of an industry leader, 2007 sales of about $3.0B and EBIT of about $200 million 21

22 Impact of Strategic Repositioning in 2008 Acquisitions ~ $200M sales Accretive 2009 Divestitures Wireless Assets FY07 Sales ~ $1.5B FY07 EBIT ~ $100M + Synergies Consolidated ST FY07 Sales ~ $1.3B Negative EBIT in

23 Outlook Q208 revenues to increase sequentially in the range between 5% and 11% vs Q108 revenues of $2.18B (ex-fmg), year-over-year growth of 10% to 16% Q208 gross margin expect about 37% +/- 1 percentage point 2008 capex to sales ratio at or below 10% Q208 based on expected effective currency rate of about $1.55 = 1 23

24 Forward Looking Statements Some of the statements contained in this release that are not historical facts are statements of future expectations and other forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended) based on management s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those in such statements due to, among other factors: future developments of 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; the results of actions by our competitors, including new product offerings and our ability to react thereto; curtailments of purchases from key customers or pricing pressures which are highly variable and difficult to predict; the financial impact of obsolete or excess inventories if actual demand differs from our anticipations; the impact of intellectual-property claims by our competitors or other third parties, and our ability to obtain required licenses on reasonable terms and conditions; the outcome of ongoing litigation as well as any new litigation to which we may become a defendant; changes in the exchange rates between the US dollar and the Euro, compared to an assumed effective exchange rate of US $1.55 = 1.00 and between the U.S. dollar and the currencies of the other major countries in which we have our operating infrastructure; our ability to manage in an intensely competitive and cyclical industry, where a high percentage of our costs are fixed, incurred in currencies other than US dollars which is our reporting currency and difficult to reduce in the short term, including our ability to adequately utilize and operate our manufacturing facilities at sufficient levels to cover fixed operating costs; our ability to restructure in accordance with our plans if unforeseen events require adjustments or delays in implementation; our ability in an intensively competitive environment to secure customer acceptance and to achieve our pricing expectations for high-volume supplies of new products in whose development we have been, or are currently, investing; the ability of our suppliers to meet our demands for supplies and materials and to offer competitive pricing; significant differences in the gross margins we achieve compared to expectations, based on changes in revenue levels, product mix and pricing, capacity utilization, variations in inventory valuation, excess or obsolete inventory, manufacturing yields, changes in unit costs, impairments of long-lived assets (including manufacturing, assembly/test and intangible assets), and the timing, execution and associated costs for the announced transfer of manufacturing from facilities designated for closure and associated costs, including start-up costs; changes in the economic, social or political environment, including military conflict and/or terrorist activities, as well as natural events such as severe weather, health risks, epidemics or earthquakes in the countries in which we, our key customers and our suppliers, operate; changes in our overall tax position as a result of changes in tax laws or the outcome of tax audits, and our ability to accurately estimate tax credits, benefits, deductions and provisions and to realize deferred tax assets. Such forward-looking statements are subject to various risks and uncertainties, which may cause actual results and performance of our business to differ materially and adversely from the forward-looking statements. Such forward-looking statements can be identified by the use of forward-looking terminology such as believes, may, will, should,, would be or anticipates or similar expressions or the negative thereof or other variations thereof, or by discussions of strategy, plans or intentions. Some of the risk factors we face are set forth and are discussed in more detail in Item 3. Key Information Risk Factors included in our Annual Report on Form 20-F for the year ended December 31, 2007, as filed with the SEC on March 3, Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this release as anticipated, believed or expected. We do not intend, and do not assume any obligation, to update any information or forward-looking statements set forth in this release to reflect subsequent events or circumstances. Unfavorable changes in the above or other factors listed under Risk Factors from time to time in our SEC filings, including our Form 20-F, could have a material adverse effect on our results of operations or financial condition. 24