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STMicroelectronics Forecasts Second-Quarter Sales Gain

STMicroelectronics NV CEO Carlo Bozotti
Carlo Bozotti, chief executive officer of STMicroelectronics NV. Photographer: Daniel J. Groshong/Bloomberg

STMicroelectronics NV, Europe’s largest semiconductor maker, forecast rising revenue in the current quarter after first-quarter bookings picked up despite weakness in the wireless business and European markets.

Second-quarter sales will advance by about 7.5 percent, plus or minus 3 percentage points, from $2.02 billion in the first three months of the year, the Geneva-based company said yesterday in a statement issued after the close of trading in New York. It reported a net loss of $176 million in the first period, compared with net income of $170 million a year earlier and wider than the $75 million loss estimated by analysts.

“While there are still macro-economic uncertainties, we believe billings have bottomed in the first quarter,” said Chief Executive Officer Carlo Bozotti. “Bookings have improved across the board during the course of the first quarter,” he said.

The stock fell 14 percent yesterday in Paris trading for its biggest drop in more than 13 years, after ST-Ericsson, a joint venture with Ericsson AB, unveiled a plan to eliminate 1,700 jobs and transfer development of some of its more advanced processors to STMicroelectronics to trim costs. The shares rose 3.8 percent to 4.47 euros as of 10:45 a.m. today.

“The results were disappointing in terms of higher than expected operating loss, but guidance confirms that the first quarter was the trough for semiconductors and points to a recovery trend for the sector in the second quarter,” said Saverio Papagno, an analyst at AZ Fund Management in Luxembourg.

Gross Margin

The company’s operating loss was $352 million in the first quarter compared with operating income of $118 million a year earlier. STMicroelectronics forecast a gross margin, the percentage of revenue left after subtracting manufacturing costs, of 34.4 percent, plus or minus 1.5 percentage points, in the second quarter from 29.6 percent in the first quarter and compared with 39.1 percent in the first three months of 2011.

STMicroelectronics’s fortunes have been affected by the performance of Nokia Oyj, one of the company’s biggest customers. In November, Nokia released its first smartphones in Europe running Microsoft Corp. software. The handset maker has previously struggled to provide handsets to compete with Apple Inc.’s iPhone and devices running Google Inc.’s Android.

Sales declined 20 percent in the first quarter, missing analysts’ estimates of $2.03 billion, according to data compiled by Bloomberg.

“Our wireless segment losses weighed heavily on our quarterly results again,” Bozotti said.

Manufacturing Costs

STMicroelectronics said earlier this month that it was ordered to pay about $59 million to NXP Semiconductors Netherlands BV in an arbitration proceeding.

“Several hundred” workers will move to STMicroelectronics, ST-Ericsson CEO Didier Lamouche said yesterday on a conference call. The venture said it expects yearly savings of $320 million by the end of 2013, and total restructuring costs are estimated to be $130 million to $150 million.

ST-Ericsson, which hasn’t turned profitable since being formed in 2009, said yesterday that its first-quarter net loss widened to $312 million from $178 million. Revenue fell 35 percent to $290 million in the period. The company, which is in a transition to new products, said yesterday that it expects net sales to increase sequentially in a “low double-digit range” in the second quarter.

“Though the move is responsible, it seems like too little too late,” said Adib Ghubril, a Toronto-based analyst at researcher Gartner Inc. “More partnerships, more alliances, more joint efforts, all that speaks of political issues and a reluctance to make the moves necessary for swifter returns.”

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