AMM (Analog, MEMS and Microcontrollers) first quarter net revenues increased 38% in comparison to the year-ago period on strong growth across all its product families, in particular MEMS. Sequentially, AMM revenues were lower by 4%. AMM operating margin was 22.0% in the 2011 first quarter, compared to 12.0% and 24.4% in the year-ago and prior quarter, respectively.
PDP (Power Discrete Products) first quarter net revenues increased 18% year-over-year, principally reflecting strong momentum in power MOSFETs and IGBTs. On a sequential basis, PDP revenues decreased 9%. PDP operating margin was 15.1% in the 2011 first quarter, compared to 9.1% in the year-ago period and 17.2% in the prior quarter.
Wireless net revenues in the first quarter decreased 34% year-over-year and 32% sequentially. Revenues in the first quarter reflected normal seasonal trends but declined more than anticipated due to a steeper drop in sales of ST-Ericsson's legacy products and weak demand at a single customer. Wireless operating loss, excluding non-controlling interest, was $91 million in the first quarter compared to a loss of $47 million and $64 million in the year-ago and prior periods.
ST recorded $87 million of income in the first quarter of 2011 compared to $72 million and $83 million in the year-ago and prior quarter, respectively, of the non-controlling interest, mainly related to the ST-Ericsson joint venture. Non-controlling interest is posted below operating results in ST's Consolidated Income Statement and reflects primarily Ericsson's 50% share in the joint venture's results, as consolidated by ST.
For additional information, see ST-Ericsson's Q1 2011 earnings results press release at www.stericsson.com
Cash Flow and Balance Sheet Highlights
Free cash flow was $51 million in the first quarter compared to $176 million and $349 million in the year-ago and prior periods, respectively.*
In the first quarter ST posted a gain of $21 million and realized net proceeds of $195 million from selling all remaining Micron shares and related unwound hedging instruments received in 2010 as a result of its final divestiture of the Flash memory business. ST has realized total net proceeds of $514 million from the sale of all Micron shares, the related unwound hedging instruments and the payment to the equity partner.
As anticipated, capital expenditures were $466 million during the first quarter of 2011 compared to $423 million and $179 million in the prior and year-ago quarters.
Inventory was $1.67 billion at quarter end compared to $1.50 billion at December 31, 2010, mainly due to the lower than expected wireless sales. In the first quarter inventory turns were 3.7.
On February 23, 2011, as holders were able to call for the redemption of ST's outstanding 2016 Convertible Bonds, the Company paid $44 million to redeem a portion of its 2016 convertible bonds. In addition, the Company paid $30 million to repurchase a portion of its 2013 Eurobonds.
(*)Free cash flow is a non-U.S. GAAP measure. For additional information, please refer to Attachment A.
ST continued to maintain a strong net financial position with a net cash position of $1.14 billion at April 2, 2011 compared to $1.15 billion at December 31, 2010 and $566 million at March 27, 2010. ST's cash and cash equivalents, short-term deposits, marketable securities (current and non-current) equaled $2.89 billion and total debt was $1.75 billion at April 2, 2011.*
Total equity was $8.84 billion, including non-controlling interest of $833 million at quarter end.
In the 2011 first quarter the Company posted a return on net assets (RONA) attributable to ST of 14.3%.*
Legal proceedings with respect to the collection of approximately $358 million due to ST by Credit Suisse pursuant to the FINRA award are continuing. We are awaiting the decision by the Court of Appeals of the Second Circuit which held a hearing on March 28, 2011 on Credit Suisse's motion to oppose the enforcement of said award.
Second Quarter 2011 Business Outlook
Mr. Bozotti stated, "Following the March 11th earthquake in northern Japan, ST quickly moved to ensure the safety of its employees and their families and to help its customers and partners. We want to express our heartfelt concern for all those affected. As the situation evolves, we will continue to work closely with our customers to assist them in any way we can. While the impacts to date have been manageable from ST's perspective, we remain vigilant and prepared to adjust to and support any shifts in demand or changes to the semiconductor supply-chain in the near-term."
The Company expects second quarter 2011 revenues to evolve sequentially in the range of about -2% to +5% after taking into account ST-Ericsson's anticipated sequential net sales decline. As a result, gross margin in the second quarter is expected to be about 38.7%, plus or minus 1 percentage point.
This outlook is based on an assumed effective currency exchange rate of approximately $1.37= euro 1.00 for the 2011 second quarter and includes the impact of existing hedging contracts. The second quarter will close on July 2, 2011.
Recent Corporate Developments
On March 16, ST announced the main resolutions to be submitted for shareholder approval at the Company's Annual General Meeting, which will be held in Amsterdam on May 3, 2011. The main resolutions, proposed by the Supervisory Board, include:
- The reappointment of Mr. Carlo Bozotti as the sole member of the Managing Board and the Company's President and Chief Executive officer for a three-year term, expiring at the 2014 Annual General Meeting;
- The reappointment for a three-year term, expiring at the 2014 Annual General Meeting, for the following members of the Supervisory Board: Mr. Didier Lombard, Mr. Bruno Steve and Mr. Tom de Waard;
- The appointment of Messrs. Jean d'Arthuys, Jean-Georges Malcor and Alessandro Rivera as new members of the Supervisory Board for a three-year term, expiring at the 2014 Annual General Meeting, in replacement of Gerald Arbola and Antonino Turicchi, whose mandates will expire, and of Didier Lamouche, who resigned in October 2010;
- The approval of the Company's 2010 accounts reported in accordance with International Financial Reporting Standards (IFRS); and
(*)Net financial position and RONA attributable to ST are non-U.S. GAAP measures. For additional information, please refer to Attachment A.
- The distribution of a cash dividend of US$0.40 per share, to be paid in four equal quarterly installments in May, August and December 2011 and February 2012 to shareholders of record in the month of each quarterly payment.
The record date for all shareholders to participate at the Annual General Meeting was April 5, 2011. The complete agenda and all relevant detailed information concerning the STMicroelectronics N.V. Annual General Meeting, as well as all related AGM materials, are available on the Company's web site (
www.st.com ) and made available to shareholders in compliance with legal requirements.