ST Micro swings to loss

July 12, 2001 Posted: 0902 GMT

LONDON (CNN) -- STMicroelectronics, the No.1 European chipmaker, said on Thursday it swung to a net loss in the second quarter as sales dropped.

The French-Italian company, which brought forward its earnings statement by a week, also issued a warning that revenue would slump in the third quarter as tech companies feel the effects of the global economic slowdown.

STMicro said it posted a second-quarter net loss of $164.5 million to June 30 compared with a profit of $336.5 million in the same quarter a year ago, as the company incurred a pretax charge of $311.3 million for restructuring and other costs.

One of Europe's tech bellwethers, STMicro said sales of semiconductors to the telecoms and computer industry dropped, slashing first–half net income by about 70 percent to $166.3 million from $574.9 million last year.

The company, whose customers include the world's No. 1 mobile phone maker Nokia and Japanese electronics giant Sony, said second-quarter sales dropped 15.5 percent to $1.57 billion  from $1.86 billion.

Orders were cancelled

"The company experienced a significant amount of end-of-period order push-outs and cancellations, reflecting accelerated weakness in certain of its end markets, particularly telecom and computer,"  the company said,

STMicro (PSTM) said second-quarter losses per share amounted to 018 compared with earnings per share of 0.37 in the same quarter of 2000. First-half earnings per share dropped more than 69 percent to 0.20 per share compared with 0.63.

The company, which ranks ahead of Infineon (FIFX) in Europe and is the third-largest chipmaker in the world, has more than 60 percent of its sales outside Europe. On June 14, it warned that second-quarter revenues and margins would miss forecasts.

Rivals Infineon and Philips are also moving into the red as companies on both sides of the Atlantic cancel chip orders and inventories swell at the semiconductor makers, which are being forced to restructure.

STMicro Chief Executive Pasquale Pistorio said he expected revenues to drop further in the months ahead.

"Based upon today's available information, we believe that the industry will bottom out in the third quarter of 2001, and we expect that ST's revenues for that period will decline sequentially by approximately 10 percent to 15 percent from second-quarter levels," said Pistorio.

STMicro shares rose 3.5 percent in Paris trading to 33.64, despite the warning, as more positive U.S. tech sector news from Microsoft (MSFT: Research, Estimates) and Motorola (MOT: Research, Estimates) lifted the gloom among investors.

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