Tuesday, STMicroelectronics N.V. (STM) reported a huge loss for the third quarter reflecting restructuring, impairment and non-recurring purchase accounting effects.
The Geneva, Switzerland-headquartered company posted a third-quarter net loss of $289 million or $0.32 per share, compared to a profit of $187 million or $0.20 per share in the same quarter last year.
Including restructuring, impairment and non-recurring purchase accounting effects, reported operating income was $55 million.
The one-time items include purchase accounting for the ST-NXP Wireless JV resulting in a $57 million inventory step-up and a $76 million in-process R&D write-off apart from $12 million of recurring amortization, a non-cash charge of $344 million related to the Numonyx equity investment and other impairment and restructuring charges of $22 million in operating profit and other-than-temporary impairment charges on financial assets of $14 million.
Net revenues increased to $2.70 billion from $2.57 billion in the prior-year quarter driven by high single-digit growth in computer and telecom segments but mitigated by a high single-digit decrease in automotive segment reflecting the significant downturn in the automotive industry as a whole.
Analysts, on average, polled by First Call/Thomson Financial expected earnings of $0.18 per share on revenues of $2.50 billion.
The chipmaker noted that ST-NXP Wireless, a joint venture owned 80% by ST, began operations on August 2, 2008 and is fully consolidated into ST's operating results.
The company estimates that year-over-year currency changes negatively impacted the Q3 2008 gross margin of 37.2% by approximately 250 basis points.
For the nine-month period, net loss narrowed to $421 million or $0.47 per share from a net loss of $496 million or $0.55 per share last year.
Net loss included pre-tax restructuring and impairment charges, in-process R&D costs, other-than-temporary impairment charge on financial assets and the impairment related to the Numonyx equity investment of $869 million or $0.97 per share impact and $949 million or $1.05 per share impact for the 2008 and 2007 nine-month results, respectively.
Net revenues for the nine months rose to $7.57 billion from $7.26 billion in the prior-year period.
STMicroelectronics estimates that currency rates adversely impacted operating income in the nine months year-to-date comparison by about $340 million or approximately 450 basis points.
Looking ahead, President and CEO of STMicroelectronics, Carlo Bozotti said, "We expect ST's sequential net revenue to be in the range between flat and -8%. This represents for FY 2008 net revenue growth between 6.2% and 8.6%, excluding FMG and the former NXP Wireless business. Despite the estimated sequential quarterly decline in sales, the 2008 fourth quarter gross margin is expected to improve sequentially to about 38.8%, plus or minus one percentage point."
On August 20, 2008, ST and Ericsson announced an agreement to merge Ericsson Mobile Platforms and ST-NXP Wireless into a 50/50 joint venture. ST is expected to exercise its option to buy NXP's 20 percent of ST-NXP Wireless before the closing of this transaction.
In the 2008 third quarter, ST repurchased $148 million of common stock under the most recently approved plan, as well as paid $80 million in dividends.
Rival mobile phone chip manufacturer and world's second largest chipmaker Texas Instruments reported a 27% year-over year decline in net income for the third quarter of $563 million or $0.43 per share on revenues of $3.39 billion. Europe's largest chipmaker Infineon is set to report earnings on December 3.
STM ended Tuesday's regular trading up 13.95% or $1.06 at $8.66 on a volume of 3.06 million shares on the NYSE.
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