ST-Ericsson reports second quarter 2012 financial results

GENEVA -- (Marketwire) -- Jul 17, 2012 --


  * Net sales $344 million; 19 percent sequential increase
  * Adjusted operating loss(1) $235 million; $62 million improvement over
    prior quarter
  * Transfer of application processor development organization finalized on
    July 1

ST-Ericsson, a joint venture of STMicroelectronics (NYSE: STM) and Ericsson (NASDAQ: ERIC), reported financial results for the second fiscal quarter ending June 30, 2012.

Sales in the second quarter increased 19 percent over the prior quarter reflecting a significant ramp of volumes of NovaThor™ platforms shipping to our major customers. Adjusted operating loss decreased sequentially by $62 million to $235 million, as the result of volume and margin improvements due to new platforms and the first steps of the ongoing actions to reduce operating expenses.

Didier Lamouche, President and CEO of ST-Ericsson said: "This has been a quarter of progress across the board. We ramped our NovaThor ModAp platform with Samsung and Sony Mobile Communications and also added several new Chinese key players. We are executing in a timely manner our new strategic plan to reposition our whole business model and we finalized on July 1, as anticipated, the transfer of the application processors development team to STMicroelectronics to build a world class partnership.

We are advancing towards our objective to reduce our breakeven point and to reach sustainable profitability. During the quarter, all profit and loss metrics showed a sequential improvement: from revenue growth to gross margin expansion and from expense reduction to the decrease of our operating loss. While these indicators are encouraging, we recognize that further improvements in the execution of our critical programs are needed. Moreover, we operate in a very dynamic, fast-changing market and a highly competitive environment. In this context our primary focus is on delivering improvements of operating results and cash flow."

2012 second quarter financial summary (unaudited)

 $ million                                         Q2 2012 Q1 2012 Q2 2011

 Income Statement

 NET SALES                                            344     290     385

 OPERATING INCOME/(LOSS) ADJUSTED(1) for:            (235)   (297)   (181)


 - amortization of acquisition-related intangibles    (19)    (19)    (25)

 - restructuring charges                              (56)    (10)    (15)

 OPERATING INCOME / (LOSS) as reported               (309)   (326)   (222)

 NET INCOME / (LOSS)                                 (318)   (312)   (221)
--------------------------------------------------------------------------

 $ million                                         Q2 2012 Q1 2012 Q2 2011

 Additional financial data
 Net financial position (2))

 Cash, cash equivalents & short-term
 deposits/debt, net                                    33      22      18

 Parent companies short-term debt                   (1238)   (978)   (445)

 Net financial position                             (1205)   (956)   (427)


 Net operating cash flow(3)                          (249)   (159)   (233)
--------------------------------------------------------------------------

Additional financial information The net financial position(2) at the end of the second quarter was negative $1205 million. Inventory decreased by $38 million reaching $171 million at the end of the second quarter.

Outlook Given, on one hand, the very substantial revenue growth during the second quarter and, on the other hand, the macro-economic and industry environment, ST- Ericsson expects net sales to be approximately flat sequentially for the third quarter 2012.

Highlights - products, technology and wins announced in the second quarter 2012

  * Customers

      * Samsung continues to incorporate the ST-Ericsson NovaThor ModAp
        platforms into their award-winning Samsung GALAXY smartphone line
        with the announcement of the Samsung GALAXY Beam and Samsung GALAXY
        Ace 2.

      * China Unicom and Yulong are now customers of the NovaThor platform.
        The NovaThor U8500 ModAp platform powers the new Coolpad Cheer
        CP7728.

      * The Xperia™ go smartphone became the fourth phone this year from
        Sony Mobile Communications to leverage the ST-Ericsson NovaThor
        platform.

      * The Shanda Bambook smartphone - the first from the China-based
        company - is powered by the ST-Ericsson NovaThor U8500 ModAp
        solution. It is the first of several smartphones planned by Shanda
        to use the ST-Ericsson NovaThor platform.

      * Two new Panasonic ELUGA devices for the Japanese market are powered
        by the compact yet power efficient Thor M5780 thin modem.

      * A new Sharp AQUOS smartphone is based on the power efficient
        ST-Ericsson Thor M5730 and available now in Japan.

  * Partners/technology

      * STMicroelectronics secured additional sourcing for 28nm and 20nm
        FD-SOI Technology with GLOBALFOUNDRIES. ST-Ericsson selected ST
        FD-SOI technology for use in its future mobile platforms, which
        will enable enhanced performance from the ST-Ericsson NovaThor
        platform with much less battery usage.

Financial results appendix (unaudited)
Consolidated Balance sheet

                                                     June 30,  December 31,
 In $ million                                          2012        2011

 ASSETS

 Current assets:

 Cash and cash equivalents                                33            9

 Trade accounts receivable, net                           50           97

 Inventories, net                                                 171                    223

  Deferred  tax  assets                                                                            10                        8

  Other  receivables  and  assets                                                        113                    102
                                                                                                            -------------------
  Total  current  assets                                                                        377                    439



  Goodwill                                                                                                742                    745

  Other  intangible  assets,  net                                                        378                    437

  Property,  plant  and  equipment,  net                                            316                    364

  Long-term  deferred  tax  assets                                                      218                    188

  Other  investments  and  other  non-current  assets                      26                      70
                                                                                                            -------------------
                                                                                                              1,681                1,804

  Total  assets                                                                                    2,058                2,243
                                                                                                            -------------------


  LIABILITIES  AND  SHAREHOLDERS'  EQUITY

  Current  liabilities:

  Short-term  borrowings  and  current  portion  of
  long-term  debt                                                                                1,238                    807

  Trade  accounts  payable                                                                    176                    175

  Other  payables  and  accrued  liabilities                                    296                    292

  Deferred  tax  liabilities                                                                    0                        0

  Accrued  income  tax                                                                                7                        8
                                                                                                            -------------------
  Total  current  liabilities                                                          1,718                1,282



  Reserve  for  pension  and  termination  indemnities                    94                      87

  Long-term  deferred  tax  liabilities                                                4                        3

  Other  non-current  liabilities                                                        25                      25
                                                                                                            -------------------
                                                                                                                  123                    115

  Total  liabilities                                                                          1,841                1,397

  Total  equity                                                                                        217                    846
                                                                                                            -------------------
  Total  liabilities  and  equity                                                    2,058                2,243
                                                                                                            -------------------
 

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