STMicroelectronics N.V. (STM)

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STMicroelectronics N.V. (STM)

Goldman Sachs Technology and Internet Conference

Feb 14, 2012 02:20 PM ET

Executives

Bob Krysiak- EVP and General Manager

Analysts

Simon Schafer - Goldman Sachs

Presentation

Simon Schafer - Goldman Sachs

Right. So in the interest of time maybe just kick off on STMicro. I'm Simon Schafer. I'm the covering analyst of ST in semi and Quadro. (inaudible) London and really great to have STMicro with us again, for a number of years. Bob Krysiak, EVP and General Manager of the U.S. for ST and then (inaudible), Investor Relations. Thanks so much guys for doing this again. Really appreciate it. And we'd heard from some of your competitors already, NXPTI at keynote. Broadcom as well talking about perhaps the stabilization in the underlying trends in the industry. Maybe to frame this debate, maybe just remind us as to what your own guidance is as to what you're seeing. I think Carlo Bozotti, your CEO talked about also some stabilization in the broader environment. Maybe give us your latest sense.

Bob Krysiak

Yes, I guess from an ST perspective, we see the market bottoming out. We don’t think things are going to get any worse for sure. The inventory situation in Q4 was high, particularly in the channel in Asia, U.S. and in Europe. I think it's gotten better. It will get better in Q1, not dramatically but better and we expect this to be the low point in the marketplace. I think in terms of production days in U.S. it will be a better situation for us in the channel. We expect to burn off more inventory than we certainly did in Q4, less vacations as I said to many analysts this morning and an improving situation from then on and our guidance was minus versus Q4, was minus 4 to minus 10. So obviously the normal decline I guess and Q1 is always the low point in the normal cycle anyway.

Simon Schafer - Goldman Sachs

I believe when you actually exclude some of the more problematic areas in the company ST-Ericson, you guys are basically suggesting that the first quarter is almost flat sequentially, almost down a touch.

Bob Krysiak

Absolutely.

Simon Schafer - Goldman Sachs

So when you think about that, the way you are seeing the stabilization is on the automotive and industrial side or is there any sort of product ramps happening in consumer electronics, maybe some differentiation as to what you're seeing in the different verticals.

Bob Krysiak

I think the last two years have been fantastic growth emerging across the globe and particularly for North America as well but we see that kind of stabilizing now. We don’t expect to have as good a year in automotive as we had previous two years but consumer products are getting better. Set top boxes improving for us. We expect to improve this year versus last year. The inventory situation was particularly bad so we think that's burned off. So hopefully orders are coming back. And in obviously the tablet smartphone market the non ST-Ericsson business, the wholly owned business we see it continue at a good pace, a very good pace. So this is MEMS power devices, protection devices, chargers and even discreet and that space is quite good.

Simon Schafer - Goldman Sachs

In essence if that's true you're basically saying look we had six months that was kind of drive by, destocking. That means we are followed by six months of restocking and then we go back to the same sort of run rate growth?

Bob Krysiak

Obviously 2010 was an exceptional as a rebound from 2009. First half of 2011 was also kind of false because of the Japan crisis and it was difficult to read and obviously the second half we suffered somewhat from clearly inventory. I think in the first half of this year, we expect it to be kind of slow, sequentially good, in the second half to improve but we don’t expect a big rebound that we saw in the pattern of 2009. We don’t expect that to happen. I think the market is subdued and flattish in the semiconductor market. Some markets will grow significantly and some others will be flattish in terms of our end markets.

Industrial sales is obviously kind of struggling because of the housing. It's so related to things like housing, lighting, industrial products and it started struggling. The rest, automotive will be flattish, will grow. The market will be flat, will grow, we expect to grow and gain share and I think as we said in consumer, set top box looks good, looks better and we have noted a number of new design wins this year with new products and the MEMS continues to grow at a fantastic pace.

Simon Schafer - Goldman Sachs

Yes, let's talk about some of the growth elements in your business in a little bit more detail. Specifically MEMS, you've been successful in granting that almost $1 billion at some point, I guess this year in terms of revenue scale, really within a three year period and there is some change in the sense that competitor dynamics at some point may change. There are some new entrants that are trying to replicate some of the product portfolios and in some instances you guys invent it. So maybe talk just a little bit about the competitive environment in MEMS. It's a high growth market.

Bob Krysiak

Absolutely. It's a matter of time before other people will, it's too attractive for other people to ignore and I guess we face different competitors in different actual product areas if you like, in micro products which we are new to but we're getting some traction this year. We expect to do well against a major competitor and in Giroux this year of course we continue to grow. We faced probably one minor competitor that we see in the marketplace. We don’t see other entrants right now. We see obviously some guys who start in automotive typically, in accelerometers trying to enter the Giroux more complex but we don’t see them in consumer electronics truthfully and threatening our position. I think we see one guy who is threatening our position in Giroux is a reasonable competitor but again one of the strength of ST is speed of innovation in its particular area (inaudible) very fast and I think the capacity we've installed in terms of Blackberry high volume manufacturing for our major competitors. So one day you will hear an announcement from one company and another and packaging side, Giroux, the Giroux performance et cetera. This business is usual. We're not going to have the market to ourselves but we absolutely expect to retain the leadership to store. We're probably five times the nearest competitor in the Giroux space in terms of quarterly revenue and we're growing.

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