STMicroelectronics Reports 2005 Third Quarter and Nine Month Revenues and Earnings

All product groups increased revenues and improved their operating margins on a sequential basis. Application Specific Product Groups' revenue increased 2.3% sequentially, and operating profit increased nearly 13% to $81 million. MLD sales were up 2.7% and operating income was up nearly 5%. MPG sales grew 10.5% sequentially and the group had an operating loss of $17 million, a significant improvement from the $66 million loss recorded in the prior quarter. Flash memory sales increased 17% sequentially to $345 million.

Q3 2005 Net Revenues Breakdown by Market Segment

The following table estimates, within a variance of 5% to 10% in the absolute dollar amount, the relative weighting of each of the Company's target market segments in the third quarter of 2005.

    % of Net Revenues
    Automotive                 15%
    Consumer                   17%
    Computer                   18%
    Telecom                    36%
    Industrial & Others        14%

Three of the five market segments experienced sequential sales increases, with both Telecom and Computer growing faster than the Company average of 3.9%. Specifically, Telecom, the Company's largest segment, grew approximately 9% followed by Computer which grew approximately 8%. Consumer reported a slight sequential increase of approximately 1%. Automotive declined approximately 4% while Industrial & Others was essentially flat.

First Nine Months 2005 Results

Net revenues for the first nine months of 2005 were $6,493 million, an increase of 0.9% over the 2004 first nine months revenues of $6,432 million. Gross profit was $2,165 million, or 33.3% of net revenues, compared to $2,376 million or 36.9% of net revenues for the 2004 first nine months. Operating income was $47 million compared to $473 million in last year's first nine months. Net income was $83 million, or $0.09 per share, compared to net income of $414 million, or $0.45 per diluted share in last year's first nine months. Net income included $137 million of aggregate charges for pre-tax impairment, restructuring charges, other related closure costs, and one-time compensation charges for the 2005 first nine months compared to $57 million of charges for pre-tax impairment, restructuring charges and other related closure costs for the 2004 first nine months.

Research and development expenses were $1,228 million, compared to $1,131 million in the 2004 first nine months. Selling, general, and administrative expenses were $766 million compared to $702 million in the same period in 2004.

Capital expenditures for the first three quarters of 2005 were $1,211 million, consistent with the 2005 full year capital budget of $1.5 billion.

In the 2005 first nine months, the effective average exchange rate for the Company was approximately $1.30 to euro 1, compared to $1.23 to euro 1 in last year's first nine months.

    First Nine Months 2005 Net Revenues and Operating Income (Loss) by Group:

    In Million US$                            First Nine Months 2005
                                                 Net    % of Net      income
    Group                                     Revenues  Revenues      (loss)

    Application Specific Product Groups*         3,686     56.8%        218
    MLD (Microcontroller, Linear &
     Discrete Group)                             1,388     21.4%        204
    MPG (Memory Products Group)                  1,375     21.2%       (145)
    Others (1)(2)                                   44      0.6%       (230)

    TOTAL                                        6,493      100%         47
    * (1) and (2) defined in a previous table


Mr. Bozotti observed, "We believe that moderate industry growth will continue into the final quarter of 2005 and through 2006. Within these dynamics, we expect that ST will continue to make solid progress in improving the performance of the Company thanks to our ongoing marketing, R&D, and cost actions.

Accordingly, we expect that ST's sequential revenue growth in the fourth quarter will be in the range between 3% and 9%. Gross margin for the fourth quarter is expected to be about 36%, plus or minus one percentage point."

This guidance is based on an effective currency exchange rate for the Company of approximately $1.22 = euro 1, which reflects current exchange rate levels combined with the impact of existing hedging contracts.

    Products, Technology and Design Wins

    -- In the digital consumer field, the company gained multiple design wins
       for both the STB7100 and STi7109 single-chip H.264 high-definition TV
       (HDTV) decoders with various OEMs addressing the worldwide operator
       market. Volume production of the STB7100 HD decoder is also ramping up
       in 90nm technology for use in IP set-top boxes (STBs) from major
       European operators. And, in the European cable market, multiple
       operators have adopted the STB5100 as the CPU/decoder solution for
       interactive DOCSIS-based set-top boxes.

    -- ST announced its first range of STB decoders to embed Secure Video
       Processor (SVP) capability, the next-generation open specification for
       the protection of digital-video content. The two new devices -- the
       STB5525, which is also ST's first single-chip solution to support dual
       TV and dual DVR (Digital Video Recorder) requirements in standard-
       definition STBs, and the STB5524, which targets the growing DVR market
       -- are ideal for satellite, cable, and terrestrial TV services.

    -- The Company announced the STx5300 family of MPEG-2 decoder chips for
       low-cost STBs and DVD recording that  anticipate  the  increasing  demands
              of  interactive  TV  applications  by  increasing  the  available  computing
              power  by  over  five  times  compared  to  earlier  devices.  The  chip  uses  the
              company's  most  advanced  processor  core,  the  ST200  VLIW  (Very  Long
              Instruction  Word)  family,  whose  high  performance  has  been  certified  at
              300MHz  by  the  Embedded  Microprocessor  Benchmark  Consortium  and  is
              intended  for  use  in  high-performance  multimedia  System-on-Chip  (SoC)

        --  ST  gained  further  success  in  Bluetooth  as  the  company's  single-chip
              STLC2500  recorded  several  design  wins  with  major  mobile  phone
              manufacturers.  And  in  audio  applications,  Taiwanese  company  TwinMos
              selected  ST's  audio  Bluetooth  chipset  for  its  high-quality  audio
              wireless  applications,  and  has  started  production  of  Bluetooth  wireless
              speakers  and  audio  dongles.

        --  In  imaging,  ST's  2-megapixel  SMIA-based  camera  modules  and  image
              processors  are  now  in  volume  production  for  use  in  mobile  phones.

        --  In  the  wireline  infrastructure  area,  ST  won  a  major  ASIC  design,  which
              will  be  implemented  in  ST's  leading-edge  65nm  process  technology.  This
              design,  won  with  a  large  telecomms  customer,  confirms  the  leading  role
              played  by  ST  in  state-of-the-art  ASICs.

        --  For  healthcare  applications,  ST  introduced  a  lab-on-chip  application
              for  DNA-based  detection  of  sepsis-causing  bacteria,  using  a  diagnostic
              panel  from  ST's  bio-tech  partner,  Mobidiag,  and  running  on  ST's  In-
              Check  platform.  Providing  faster  and  more  reliable  results  at  a
              fraction  of  the  cost  and  complexity  of  conventional  laboratory  systems,
              the  miniaturized  solution  enables  early  detection  of  disease,  resulting
              in  better  patient  treatment  choices  and  lower  costs  for  healthcare

        --  In  automotive,  ST's  strategic  partnership  with  Bosch  has  been
              reinforced  with  the  signature  of  an  agreement  for  ST's  next-generation
              BCD6S  smart  power  process.  Also  in  smart  power,  ST  gained  a  significant
              design  win  in  battery  charging  from  an  important  European  OEM.

        --  In  the  power  train  area,  ST  won  designs  for  several  new  kits  with  two
              major  American  OEMs  for  the  European  and  American  markets.  In  the  car
              body  area,  ST  signed  with  a  major  North  American  OEM  for  an  advanced
              smart  body-control  module.

        --  In  car  safety,  ST  has  extended  its  reach  into  the  Japanese  market  by
              winning  a  design  from  an  important  new  OEM.  Also  in  car  safety,  ST  won
              a  design  for  a  new  ABS  chipset  with  a  major  American  OEM  for  the
              worldwide  market.

        --  In  car  radio  and  multimedia,  ST  won  a  design  for  an  advanced
              digital-input  audio  power  amplifier  with  a  leading  North  American
              customer  for  the  2007  model  year.  And  finally  in  automotive,  ST
              announced  that  it  had  shipped  a  cumulative  total  of  approximately  10.5
              million  XM  Satellite  Radio  Baseband  Decoders  to  radio  manufacturers,
              since  starting  production  in  2001.  The  10.5  million  XM  Radio  decoders
              have  been  delivered  to  equipment  manufacturers  including  Delphi  and
              Pioneer,  for  vehicle,  portable  and  home  radio  receivers.

        --  In  peripherals,  ST  started  shipments  of  an  advanced  SATA  (Serial  ATA)
              SoC  to  a  major  hard-disk  drive  manufacturer.  Additionally,  ST,  in
              conjunction  with  Synopsys,  conducted  and  successfully  completed
              interoperability  testing  of  its  90nm  SATA  MIPHY  (Multi-Interface  PHY)
              Physical  Layer  interface  macro-cell,  aimed  at  designers  integrating
              SATA  functions  into  SoC  designs  for  hard-disk  drive  applications.

        --  In  smart  cards,  ST  announced  that  its  established  ST22L128  32-bit
              secure  microcontroller  has  received  "Common  Criteria"  security
              certification  at  Evaluation  Assurance  Level  EAL5+  (Augmented),  the
              first  0.18-micron  32-bit  secure  MCU  to  be  certified  at  this  level.

        --  ST  announced  volume  production  of  the  ST19WP18  Trusted  Platform  Module,
              and  confirmed  that  more  than  one  million  of  the  TCG  1.2  (Trusted
              Computing  Group)  solutions,  complete  with  software  stack,  had  been
              delivered  to  a  number  of  major  PC  motherboard  makers.

        --  In  RFID,  ST  introduced  an  ultra-high  frequency  contactless  memory  chip,
              compliant  with  the  latest  Electronic  Product  Code(TM)  (EPC)
              specifications.  ST's  XRAG2  RFID  chip  delivers  interoperability,
              enhanced  security,  and  optimized  performance  for  next-generation
              supply-chain  and  logistics  applications.

        --  In  NOR  Flash,  multiple  leading  mobile  phone  manufacturers  started
              platform  development  based  on  ST's  90nm  2-bit  per  cell  512-Mbit  NOR
              Flash.  In  NAND  Flash,  ST  started  high-volume  shipments  of  1.8V  2-Gbit
              NAND  Flash  in  90nm  technology  to  a  market-leading  multimedia-phone
              manufacturer.  Also,  production  of  ST's  128-Mbit  NAND  Flash  device  was
              transferred  to  90nm  process  technology.  The  shrink  to  90nm  reduces  both
              the  cost  and  the  power  consumption  of  the  memory  chip,  which  is  widely
              used  in  consumer  equipment  such  as  digital  still  cameras,  audio
              recorders,  PDAs,  STBs,  printers,  and  bundled  Flash  cards.

        --  In  microcontrollers,  ST  won  a  design  for  its  ST7232A  8-bit
              microcontroller  at  one  of  the  top  five  Chinese  air-conditioner
              manufacturers.  ST  also  expanded  its  family  of  USB  MCUs  with  new
              products  in  its  ST7263B  series,  which  has  become  the  reference  solution
              for  a  range  of  USB-based  peripheral  products.  ST  also  announced  8-bit
              ST7Lite  Flash  microcontrollers  for  control  applications,  adding  new
              embedded  peripherals  to  the  established  ST7Lite  feature  set.

        --  In  power,  ST  introduced  a  reference-design  platform  for  the  emerging
              electronic  power-meter  market.  The  versatility  and  low-cost  provided  by
              electronic  meters  allows  manufacturers  to  implement  features  that  were
              impractical  with  older  mechanical  designs,  such  as  protecting  against
              meter  tampering  and  theft  of  service;  and  automatic  meter  reading.

        --  ST  won  an  important  design  with  a  major  North  American  server
              manufacturer  for  its  low-voltage  power  MOSFET,  the  STSJ100NHS3LL,  which
              is  implemented  in  ST's  proprietary  STripFET(TM)  III  technology.  ST  also
              announced  production  of  the  first  devices  built  using  the  second
              generation  of  its  MDmesh(TM)  high-voltage  power  MOSFET  technology.

        --  In  high-end  analog  ICs,  ST  gained  a  design-win  with  a  major  Asian
              manufacturer  for  its  new  Gamma-Correction  circuit  for  LCD  panel

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