STMicroelectronics N.V. (STM)

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STMicroelectronics NV (STM)

Q4 2012 Earnings Call

January 31, 2013 5:00 pm ET


Tait Sorensen – Director, Investor Relations

Carlo Bozotti – President and Chief Executive Officer

Mario Arlati – Executive Vice President and Chief Financial Officer

Lorenzo Grandi – Corporate Vice President, Corporate Control


Francois Meunier – Morgan Stanley & Co.

Tristan Gerra – Robert W. Baird & Co. Equity Capital Markets

Gareth Jenkins – UBS

Didier Scemama – Bank of America Merrill Lynch

Simon Schäfer – Goldman Sachs

Sandeep Deshpande – JPMorgan Securities Plc

Peter Knox – Société Générale

Johannes Schaller – Deutsche Bank

Lee Simpson – Jefferies International Ltd.



Ladies and gentlemen, good afternoon. Welcome to the Q4 and Full Year 2012 Earnings Results Conference Call and Live Webcast. I’m Goren, Chorus Call operator. The conference must not be recorded for publication or broadcast.

At this time, it’s my pleasure to hand over to Mr. Tait Sorensen, Group Vice President, Global Investor Relations. Please go ahead, sir.

Tait Sorensen

Thank you, and thank you to all for joining our fourth quarter and full year 2012 conference call. Hosting the call today is Carlo Bozotti, ST’s President and Chief Executive Officer.

Joining Carlo today on the call is Georges Penalver, Executive Vice President, Chief Strategic Officer; Mario Arlati, Chief Financial Officer; Carmelo Papa, Executive Vice President of the Industrial & Multisegment Sector; Jean-Marc Chery, Executive Vice President, Manufacturing & Technology R&D and General Manager of the Digital Sector; Lorenzo Grandi, Corporate Vice President, External Reporting.

This call is being broadcast live over the web and can be accessed through ST’s website. A replay will be available shortly after the conclusion of this call.

This call will include forward-looking statements that involve risk factors that could cause ST’s results to differ materially from management’s expectations and plans. We encourage you to review the Safe Harbor statement contained in the press release that was issued with the results last night and also in ST’s most recent regulatory filings for a full description of these risk factors. As a reminder, please limit yourself to one question and then a brief follow-up.

And now, I’d like to turn the call over to Carlo Bozotti, ST’s President and CEO. Carlo?

Carlo Bozotti

Thank you, Tait, and thank you for joining us on this call, and thanks also to those of you who attended the year-end presentation earlier today in Paris. As we enter 2013, we are energized by the new possibilities in front of us, as we sharpen our focus and build a new ST, leveraging our proven leadership in important key product markets. In this regards, in December, we outlined our vision and new strategic plan, our growth drivers and confirmed our new financial model.

During 2012, we prepare for this future while also managing through a difficult year as we dealt with a weaker semiconductor industry and business environment, as well as significant structural changes in market and end customer competitive dynamics, which negatively impacted ST. We exit 2012 with a strong position, with respect to market leadership in key areas of our product portfolio, IP leadership, and solid flexible financial position.

Today, I would like to begin with some key summary points and then move to a review of the fourth quarter and the year, our new strategic plan and then our outlook and initiatives for 2013.

First, both revenue and gross margin were in line with our outlook, in particular our revenue performance came in above the midpoint of our guidance even with the ongoing softness in the semiconductor market. Our wholly-owned businesses increased 0.2% and 1.6% on a sequential and year-ago basis. Based on independent market projections, we believe we gain market share in the fourth quarter in our served markets.

Second, our action during 2012 enabled us to improve our net financial position at year-end compared to 2011, despite the significant cash used by ST-Ericsson. So, this was a big challenge to overcome and we did.

Third, we’ve been able to maintain a dividend of $0.40 per share for shareholders during 2012. In total, we paid $355 million in dividends this past year.

Fourth, our new product momentum represents a combination of strategy and innovation and marketing initiatives. During 2012, we made important progress in our new major accounts program with revenue from these accounts growing a 13% on an annual basis. In addition, this group of companies is well balance across our five target product growth drivers. Looking forward, we also want to be more pervasive in the mass market and our product and marketing plans under our new strategy will drive this objective.

Fifth, we are advancing our plans towards our exit from ST-Ericsson. In the fourth quarter, ST took an impairment charge of $545 million for wireless goodwill and other intangible assets, bringing investment value of ST-Ericsson on our books to a negligible amount.

In addition, both Ericsson and ST have waived their loan to ST-Ericsson in the amount of $1.54 billion. For ST, this loan was reflected in our new financial position already – in our net financial position already. So our net financial position and net attributable financial position are both at $1.19 billion at the end of 2012.

Turning now to the fourth quarter, let me share some key points. As I mentioned earlier, our revenue and gross margin results were well in line with our guidance. Looking at ST’s revenue results, based upon our bookings, we had expected to see relatively flat revenue results on a sequential basis. And that was the case.

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