STMicro sees new products, better market lifting sales

Reuters News
Posted: Apr 23, 2013 6:23 AM

By Edwin Chan and Leila Abboud

SAN FRANCISCO/PARIS (Reuters) - European chipmaker STMicroelectronics said signs of market recovery and new products, such as motion sensor chips for video games consoles, should drive a pick up in sales in the second half of this year.

The bullish outlook lifted its shares over 6 percent in Tuesday morning trading, despite the group posting a sixth straight quarterly loss due to its mobile chip joint venture with Sweden's Ericsson, which is being closed.

"We see a good trend in bookings this year so far," said Chief Executive Carlo Bozotti on a conference call. "It is pretty broad across regions including Europe, and also across industrial sectors."

"The challenge will be to see if this trend is sustainable or not given the ongoing macroeconomic issues globally. But we expect to see strong sales in the second half largely because of new product launches."

STMicro, the eighth-biggest semiconductor maker by sales and a competitor of Intel and Texas Instruments, predicted second-quarter revenue would rise 3 percent sequentially, plus or minus 3.5 percentage points.

The maker of chips for cars, computers and mobile phones also said it was starting to see the benefits of winding down the ST-Ericsson venture, as its research and development costs were $57 million lower in the quarter.

Bozotti said the sales of ST-Ericsson would go down to zero by roughly the middle of next year and that lower costs would leave the parent company structurally more profitable.

The parent companies of ST-Ericsson decided in March to end venture after failing to find a buyer and are splitting some of its businesses between them, while closing the rest.

A Paris-based trader said STMicro had done well to give better visibility to investors on the rest of the year.

"The gross margin was strong and the group gave an encouraging outlook ... but the group still needs to find new growth engines" after the exit from mobile chips, he said.

STMicro is seeking to grow its sales in motion sensor chips that go in video game consoles and smartphones like Apple's iPhone, as well as chips to connect cars with mobile phone networks and location systems.

Without giving details, Bozotti promised new product launches would boost growth this year.

STMicro on Monday reported first-quarter revenue of $2.01 billion, down slightly from $2.02 billion a year ago, and broadly in line with analysts' expectations.

Analysts had on average expected first-quarter revenue of $2.02 billion and June-quarter revenue of $2.13 billion, according to Thomson Reuters I/B/E/S.

The group had a first-quarter net loss of $171 million, compared with a net loss of $176 million the same quarter a year earlier.

STMicro also said it would decide and distribute quarterly dividends semi-annually, rather than just once a year, as was previously the case. It plans to pay a 10 cent-a-share dividend in this year's second and third quarters.

(Additional reporting by Alexandre Boksenbaum-Granier in Paris; Editing by Diane Craft and Mark Potter)