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Bozotti cites key points for ST's rehabilitation

Posted: 04 Nov 2008 ?? ?Print Version ?Bookmark and Share

Keywords:loss? manufacturing? MEMS?

After STMicroelectronics NV (ST) reported a Q3 net loss of $289 million, Carlo Bozotti, president and CEO of ST, stressed four key priorities for the group.

At an analysts' conference, Bozotti said because the market environment has changed swiftly, the first priority for ST will be to continue in taking the necessary actions to navigate through this downturn. "Essentially, we have the financial strength and resources needed to both manage through and emerge as a strong industry player," he said.

Several times in relation to the conference, Bozotti emphasized the value of a stronger dollar and its effects. The dollar has indeed gained 27 percent in value against the euro since ST last reported its earnings in July. Also present at the analysts' conference, Carlo Ferro, ST's chief financial officer, said the stronger dollar is already sustaining margins. He added that full benefits should be visible in Q2 09.

As he moved to the second priority, Bozotti however proved cautious as he declared: "Even though we are benefiting from a stronger dollar, we will continue to optimize our cost structure improving our manufacturing efficiencies and advance our asset-lighter structure. Our plans to rationalize our manufacturing operations are well underway, but we have not yet reached agreements to sell."

Selling, not a prime concern
He added that, "Our priority to sell fabs is an ongoing concern, but under the current difficult market conditions, we will move forward with our original plan while attempting to find other potential solutions."

To further maximize asset utilization and enhance performance for shareholders and customers, after the decision to deconsolidate its flash memory business, ST announced in July 2007, it would rationalize three of its manufacturing operations, namely its 6-inch (150mm) wafer fab in Carrollton, Texas, its 8-inch (200mm) fab in Phoenix, Arizona, and its back-end packaging and test facility in Ain Sebaa, Morocco.

Synergies strengthened
With regard to the third priority, Bozotti said with respect to ST's wireless business, the company is shifting toward an accelerating timeline to capture the identified synergies. "At the same time, our goal is to complete the ST-Ericsson joint venture (JV) as soon as feasible and to have a clear road map to drive success upon closing of the JV," he added.

In August, ST and Ericsson indeed agreed to merge ST-NXP Wireless and Ericsson Mobile Platforms (EMP) and into a 50/50 JV. Under the transaction terms, Ericsson's contribution represents $1.1 billion in cash. This will be used to pay $700 million to ST in exchange for ST-NX, and to provide a cash buffer of $400 million for the new venture. ST is expected to exercise its option to buy NXP's 20 percent stake in ST-NXP Wireless before the closing of the transaction.

The fabless JV is expected to employ about 8,000 workers and have estimated annual revenue of $3.7 billion.

Dependence on key assets
The fourth priority, said Bozotti, is to continue to leverage the company's key assets, particularly power solutions. He said, "Our presence in MEMS, analog and MCUs, to name just a few of our many products, are important contributors to our performance. Our new products have enabled us to increase our position with our new key target customers."

Bozotti stressed on ST's strong financial position. He said, "Thanks to our systematic ability to generate operating cash flow, and our solid capital structure we have been able to advance our strategic initiatives, independent of the uncertainties in the financial market. We are very proud of our accomplishments in the first nine months of 2008 and we are well-positioned to face the downturn in the market."

- Anne-Francoise Pele
EE Times Europe

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