April 10 (Bloomberg) -- STMicroelectronics NV fell the most in more than two months in Paris after Europe’s largest semiconductor maker reduced its gross margin forecast because of an arbitration award.
STMicroelectronics declined as much as 5.9 percent to 5.44 euros, the biggest intraday drop since Jan. 24, and was down 5.7 percent at 5.45 euros as of 1:39 p.m.
“This is clearly unexpected and it’s triggered a drop in price even if it has more to do with sentiment than the charge itself, which is a one-off item,” said Saverio Papagno, an analyst at AZ Fund Management in Luxembourg.
STMicroelectronics was ordered to pay about $59 million to NXP Semiconductors Netherlands BV in an arbitration proceeding, the Geneva-based company said in a statement yesterday. The ruling relates to a claim against STMicroelectronics for “underloading charges to be included in the price of wafers” supplied by NXP to STMicroelectronics’s wireless joint venture from October 2008 through December 2009.
The award, which will increase the cost of sales in the first quarter, will hurt the gross margin, the percentage of revenue left after subtracting manufacturing costs. The measure will be narrowed by 2.6 percentage points to a range of 28.9 percent to 31.9 percent of sales, according to the statement. The chipmaker had forecast in January that the gross margin in the first three months would be about 33 percent, plus or minus 1.5 percentage points.
“Certain issues” raised by STMicroelectronics were not addressed and will be part of a second arbitration before the same International Chamber of Commerce tribunal scheduled for June, with a final decision expected in the following 12 months, the company said. STMicroelectronics aims “to convince the ICC Tribunal to reverse the economic effect of its award in the first arbitration,” it said.
The chipmaker is set to report first-quarter results after the close of trading in New York on April 23.
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