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May 4, 2009

ST-Ericsson posts $89m net loss for first two months of operation

Plans to launch a restructuring plan that is expected to save approximately $230m

By CBR Staff Writer

ST-Ericsson, a joint venture of STMicroelectronics and Ericsson, has posted a net loss of $89m for its first two months of operation from February 2, 2009, to March 28, 2009.

The company reported net sales of $391m for its first two months of operation. The company also reported operating loss of $98m in this period.

The company is planning to launch a restructuring plan for immediate execution and is due to be completed by the second quarter of 2010. This plan is incremental to the $250m cost synergies program announced by ST-NXP Wireless in November 2008.

Annualized savings of the new restructuring plan are expected to be approximately $230m upon completion. Restructuring costs are estimated in the range of $70 – 90m, of which the majority is expected to be recorded during the second quarter of 2009.

According to the company, the main assumptions of the restructuring plan are: a re-alignment of product roadmaps to create a more agile and cost efficient R&D organization; and a reduction in workforce of 1,200 worldwide to reflect further integration activities following the merger, lower sales volumes and limited visibility on the timing of market recovery.

Alain Dutheil, president and CEO of ST-Ericsson, said: Our sales development in the quarter reflects the broad-based economic downturn that has led to weaker consumer demand for handsets and put pressure on the overall wireless semiconductor industry. Even in such a challenging climate, during the first quarter of 2009 we confirmed our number two position in the market, we renewed our focus on innovation and we strengthened our partnership with key customers.

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