STMicro Sees Third-Quarter Sales Trailing Estimates

STMicroelectronics NV (STM), Europe’s largest chipmaker, forecast third-quarter revenue will grow by about 2.5 percent from the previous period, indicating sales may miss analysts’ estimates amid weaker demand.

Sales for the three months ending Sept. 29 will increase in the range of 2.5 percent, plus or minus 3 percentage points, the company said yesterday. At the midpoint of the forecast, revenue would be $2.2 billion, missing the average analyst estimate of $2.31 billion, according to data compiled by Bloomberg. Second- quarter sales rose 6.5 percent from the first quarter.

“The global macroeconomic environment is softening,” Chief Executive Officer Carlo Bozotti said in a conference call today. “We had weaker bookings in the last part of the second quarter,” the CEO said, adding that such trend has continued at the beginning of July.

STMicroelectronics, which also said it plans to cut capital expenditure by 25 percent this year, has been affected by the performance of Nokia Oyj (NOK1V), one of the company’s biggest customers. The performance in the past two years of its “former largest customer” has cut sales at STMicroelectronics by about $1 billion a year, Bozotti said. Last week, Nokia reported a fifth consecutive quarter of plunging revenue, while sales of the Espoo, Finland-based company’s flagship Lumia smartphone beat estimates.

Shares Fall

The stock declined 3.7 percent to 3.76 euros in Paris trading, giving the company a market value of 3.43 billion euros ($4.14 billion).

“The guidance is below expectations due to a weakening of the orders trend in June, which has certainly been affected by the general economic slowdown,” said Saverio Papagno, an analyst at AZ Fund Management in Luxembourg. “The trend observed by STM is consistent with those reported by other companies in the sector.”

Texas Instruments Inc. (TXN), the largest maker of analog chips, forecast yesterday third-quarter sales and profit that may miss some analysts’ estimates as an economic slowdown in Europe crimps demand for electronics. Infineon Technologies AG (IFX) said last month that global economic uncertainties led to a softer- than-expected development in the company’s operating business in the quarter through the end of June.

Intel Forecast

Intel Corp. (INTC), the world’s biggest chipmaker, last week scaled back its annual sales forecast as personal-computer demand fails to rebound among consumers in the U.S. and Europe. Revenue at Santa Clara, California-based Intel will rise 3 percent to 5 percent in 2012, it said on July 17. That was lower than an earlier projection for a gain at a percentage in the high single digits.

The sovereign-debt crisis in Europe “has a material impact on our top line as one-third of our customers are in Europe,” Bozotti said on the call. “But it also has a positive effect on our cost base, which will significantly improve as 50 percent of our expenses are in euros.”

Based in Geneva, STMicroelectronics is continuing to benefit from products including micro-controllers and micro- electromechanical systems, known as MEMS, which have become ubiquitous in smartphones and tablets such as Apple Inc. (AAPL)’s iPhones and iPads, providing motion-sensing for turning, tilting and tapping devices.

Net Loss

STMicroelectronics reported a second-quarter net loss of $75 million compared with net income of $420 million a year earlier. Net sales declined 16 percent to $2.15 billion in the three months through June 30. Analysts had estimated a loss of $63.5 million on sales of $2.16 billion, according to Bloomberg data.

The gross margin, the percentage of revenue left after subtracting manufacturing costs, rose to 34.3 in the second quarter from 29.6 in the previous period. STMicroelectronics forecast the third-quarter gross margin will be 35.3 percent, plus or minus 1.5 percentage points.

STMicroelectronics said it plans to cut its 2012 capital expenditure by about 25 percent to $500 million to $600 million.

The chipmaker has also been affected by losses at ST- Ericsson, its chip joint venture with Ericsson AB (ERICB), which hasn’t turned profitable since being formed in 2009. ST-Ericsson said July 17 that its second-quarter net loss widened to $318 million from $221 million a year earlier. Sales in the period rose 19 percent to $344 million from the previous quarter in what CEO Didier Lamouche called “a quarter of progress across the board.”

ST-Ericsson projected sales to be “approximately flat” in the current quarter from the previous three months as the economy weighs against the “very substantial revenue growth” of the second quarter.

ST-Ericsson announced in April a plan to eliminate 1,700 jobs and on July 1 completed the transfer of its application processor development team to STMicroelectronics as part of a plan to trim costs.

To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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