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STMicroelectronics Seeks 25% Sales Growth for Margin Goal

STMicroelectronics NV (STM), Europe’s biggest semiconductor manufacturer, said it will need to increase quarterly revenue by as much as 25 percent to reach a goal of operating profit at 10 percent of sales.

The manufacturer must generate revenue each quarter of $2.25 billion to $2.5 billion to achieve its target, Chief Executive Officer Carlo Bozotti said today at a press conference in Paris. STMicroelectronics plans to report sales exceeding $10 billion a year by 2017, he said.

STMicroelectronics is pulling out of its unprofitable wireless-chip joint venture with Ericsson AB (ERICB) as mobile-phone manufacturing customers Nokia Oyj (NOK1V) and BlackBerry maker Research In Motion Ltd. (RIM) struggle with a sales slump. Bozotti, pushing to put his Geneva-based company’s chips into cars, video-game consoles and fitness machines, has a target of reducing net operating expenses by as much as 33 percent by early 2014.

The third-quarter operating margin, excluding impairment and reorganization charges and one-time items, was 0.3 percent of revenue as earnings were held back by the venture, STMicroelectronics said in its nine-month earnings report. The company said in a statement today that it’s sticking to a forecast a week ago that the margin will grow “rapidly” toward the 10 percent goal, and said it’s targeting “a significantly higher level of profitability by 2017.”

Cost Targets

The program to reduce quarterly costs to $600 million to $650 million by the beginning of 2014, from an average $900 million this year, will help the manufacturer achieve its margin target, Bozotti said today.

STMicroelectronics fell as much as 2.1 percent to 5.18 euros and was trading down 1 percent at 2:46 p.m. in Paris, where the company has its main listing. The stock, which was at an eight-month high yesterday, has risen 14 percent this year, valuing the company at 4.77 billion euros ($6.29 billion).

The quarterly revenue goal compares with analysts’ estimates that STMicroelectronics’ sales in the first three months of 2013 will about match the $2 billion posted a year earlier.

The ST-Ericsson venture was formed in 2009. It announced plans in April to eliminate 1,700 jobs and transfer some product development to STMicroelectronics.

The partners are discussing options for STMicroelectronics’ withdrawal, while Stockholm-based Ericsson, the world’s biggest maker of mobile-phone networking equipment, believes technology it contributed to the venture has “strategic value” for the wireless industry, the companies said on Dec. 10. Bozotti declined today to comment on the talks or on any plans regarding the workforce.

To contact the reporter on this story: Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net

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