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July 19, 1998

STM Q2 EARNINGS UP 6%, POOR Q3 PREDICTED

By CBR Staff Writer

Franco-Italian chip manufacturer STMicroelectronics NV, formerly known as SGS-Thomson Microelectronics, has been able to report an increase in both net revenues and profits for the second quarter and first half of the year, but its gloomy outlook for the third. What saved the company from the same dismal results unveiled by other chipmakers (most recently Siemens, which warned of a major loss in its semiconductor division a day earlier) was, of course, its specialty chips. Differentiated products, such as integrated circuits for hard disk drives and set-top boxes, were up to sales of $673m in the second quarter, up 21.4% from the same period last year, representing 62.9% of total sales during the period, up from 57% in the second quarter of 1997. As for its memory product division, the place where everyone else is hurt badly right now, president and CEO Pasquale Pistorio said they were ‘essentially flat’ due to increasing pricing pressure, even though it enjoyed sequential growth in the quarter thanks to increased demand in smartcard revenue. The company reported second quarter net profits up 5.9% at $97.5m on sales up 10.4% at $1.07bn; mid-term net rose 2.8% to $187.7m on turnover up 8.4% at $2.07m. Net per share rose 4.5% to $0.69 in the quarter, up 2.3% to $1.34 in the half. The markets failed to enthuse about STM’s figures, however concentrating instead on the company’s fears that soft market conditions might lead to a poor third quarter, even though Pistorio reckons the second half as a whole will show results higher than the first.

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