SAN FRANCISCO—STMicroelectronics NV Monday (July 25) reported second quarter sales that were in line with analysts' expectations, but the company guided for lower-than-expected third quarter sales, citing lingering effects from the March 11 earthquake off the coast of Japan and weaker demand from a major wireless customer—likely Nokia.
"As anticipated, in this quarter we experienced headwinds related to the situation in Japan and currency rates, while continuing to face ST-Ericsson's ongoing transition," ST President and CEO Carlo Bozotti said in a statement. "Additionally, in June, we saw weaker demand and a much weaker than planned outlook for wireless products from a major customer and we saw signs of softening demand in some of our businesses, such as digital consumer products and microcontrollers."
Last week, ST-Ericsson, the mobile phone chip joint venture between ST and Ericsson AB, reported a decrease in sales and an increase in losses for the second quarter and also provided a flat outlook for the third quarter. The joint venture also reported carrying costs from a renewed restructuring plan announced in June.
Nokia, which has seen sales tumble since it announced a move to Microsoft's Windows Mobile operating system, said in April it would slash its workforce by 12 percent—about 7,000 jobs—in a cost-cutting move. Last month, Texas Instruments Inc. lowered its second quarter sales and earnings targets, citing lower demand from Nokia.
Looking back at the first half of 2011, Bozotti said ST made measurable progress in advancing its product portfolio, clearly gaining market share as net revenues from its wholly-owned businesses increased 17 percent compared to the first half of 2010. "Our product portfolio is gaining further traction, with significant design wins in the growth application areas we are targeting: energy management and savings, trust and data security, healthcare and wellness as well as smart consumer devices," Bozotti said.
ST (Geneva) reported sales for the quarter of $2.57 billion, up 1.3 percent sequentially and 1.4 percent year-over-year. The company reported a net income for the quarter of $420 million, up from $170 million in the previous quarter and $356 million in the year-ago quarter.
Second quarter gross margin was 38.1 percent, ST said, down from 39.1 percent in the previous quarter and 38.3 percent in the year-ago quarter. The decline was mostly due to unfavorable currency effects, impact on manufacturing of a change in demand by a major customer and average selling prices, including a less favorable product mix, ST said.
Consensus analysts' expectations for ST's second quarter called for sales of about $2.57 billion, according to Yahoo Finance.
"Our second quarter net revenues and gross margin results were substantially in line with our business outlook, with sales growth driven by a solid performance from automotive," Bozotti said.
ST said it expects third quarter revenue to between $2.44 billion and $2.62 billion, a sequential change of between minus 5 percent to plus two percent. Gross margin in the third quarter, due to temporary manufacturing cutbacks at selected facilities, is expected to be about 35.5 percent, plus or minus 1 percentage point, ST said.
Consensus analysts' expectations for ST's third quarter called for the company to guide for revenue of about $2.73 billion, according to Yahoo Finance.
"Entering the third quarter, we have moved quickly to lower production levels at certain fabs primarily due to the significant reduction in the demand outlook from a major customer compared to previous expectations," Bozotti said.
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