STMicroelectronics Has $152 Million Loss on Ericsson Venture

STMicroelectronics NV (STM), Intel Corp.’s biggest competitor in Europe, reported a seventh consecutive quarter of net losses on costs at its wireless chip venture with Ericsson AB, to be split up next month.

The second-quarter net loss was $152 million, compared with a $75 million loss a year earlier, the Geneva-based company said yesterday. Revenue slipped 4.8 percent to $2.05 billion while the gross margin was 32.8 percent, compared with the 32.7 percent average estimate compiled by Bloomberg from eight analysts.

STMicroelectronics is splitting up its unprofitable wireless venture with Ericsson, cutting jobs and focusing on high added-value products to restore profitability. Chief Executive Officer Carlo Bozotti is pushing to put more chips into cars and game consoles as handset customers Nokia Oyj (NOK1V) and BlackBerry Ltd. try to reverse sales declines.

The company forecast “progressive improvement” in its gross margin for the third quarter to 33.5 percent, plus or minus 2 percentage points. Net revenue, excluding wireless, for that period should rise about 3.5 percent. With wireless, revenue should be “flat,” Bozotti said in a statement.

‘Solid Progress’

“There was a positive acceleration in the closing of ST-Ericsson transaction with a cost savings of about $100 million,” Francesco Previtera, an analyst at Banca Akros SpA in Milan, said in a phone interview. The third-quarter net revenue forecast is less than the 6 percent Previtera said he’d estimated.

The shares fell as much as 7.1 percent and traded 6.7 percent lower at 7.01 euros at 1:43 p.m. in Paris. They have gained 32 percent this year through yesterday.

STMicroelectronics expects to reach break-even in the third quarter of this year and record a profit in the fourth quarter, Bozotti said on a conference call with reporters today.

“We again made solid progress towards our quarterly net operating expenses target range,” Bozotti said. “Excluding ST-Ericsson, we have seen a progressive improvement in bookings in the second quarter, although, towards the end of the second quarter, we experienced a softening in the smartphone market.”

STMicroelectronics, Europe’s biggest semiconductor maker,, said demand is improving at all units except wireless. Excluding that business, revenue rose 6.8 percent.

Nokia, which uses STMicroelectronics chips in its mobile phones, last week reported revenue that missed analysts’ estimates as intensifying competition across the market cut handset sales by 27 percent.

To contact the reporter on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net

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

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