ST slashes 4500 jobs, halves capex in $700M savings plan
Although STMicroelectronics grew revenues faster than the overall market during 2008, it is still not immune to the downturn and will cut jobs and capital expenditures in 2009.
By Suzanne Deffree, Managing Editor, News -- EDN, January 28, 2009
STMicroelectronics announced it will shed 4500 jobs and halve its capital expenditures while reporting on its Q4 and full-year 2008 results, both of which showed declines on the global economic downturn.
December quarter revenues of $2.28 billion decreased 15.6% sequentially and 17% year-over-year, driven by what the company described as "significant weakness" across most geographies and market segments.
"Fourth quarter net revenues came in at the mid-point of our updated outlook and reflected the accelerated level of order push-outs and cancellations and decrease in demand as the quarter progressed," ST President and CEO Carlo Bozotti said in a statement Tuesday afternoon. "All product areas were negatively affected, in particular automotive, wireless, and computer peripherals."
On that, ST reported a Q4 operating loss of $139 million and a net loss of $366 million, compared to an operating loss of $15 million and net income of $20 million in Q4 2007. Inventory was $1.84 billion at the quarter's end and reflected increased levels due to the "sharp decrease in sales volumes in Q4 and differences in the anticipated mix of products sold," ST said. Gross margin was 37.5%, compared 36.9% in Q4 2007.
For the full year, ST reported revenue of $9.84 billion, down just 1.6% from 2007's revenue of $10 billion. R&D for the year was $2.15 billion, compared to $1.8 billion in 2007. Gross margin increased to 37.1%, compared to 35.4% for 2007. Operating loss for the year was $198 million, compared to operating loss of $545 million in 2007. 2008 net loss of $786 million compared to a net loss of $477 million and included charges associated with inventory step up for ST's NXP Wireless purchase and impairment charges related to the company's Numonyx equity investment.
The two charges were anticipated. ST-NXP Wireless, a joint venture owned 80% by ST, began operations on August 2, 2008. ST later that month announced it would buy out NXP's 20% stake and merge in Ericsson Mobile Platforms. Prior to that at the end of Q1, ST deconsolidated its flash memory group segment and took an equity interest in Numonyx, the flash joint venture it set up with Intel Corp.
"Looking at our position in the semiconductor market, we grew our revenues faster than the overall market during 2008 and estimate we are approaching a record level of market share," Bozotti said. "While it is extremely difficult to predict how the industry will evolve in 2009, we believe it could be a year of fundamental change and opportunity."
Bozotti outlined ST's priorities for the year, including reducing its costs by more than $700 million.
"The actions are a combination of the ongoing restructuring initiatives and new programs that are focused on resizing the company's manufacturing operations and streamlining expenses, and are expected to affect about 4500 net jobs worldwide in 2009," he said.
Bozotti also said that as ST will continue with its "lighter asset strategy" in the year it has reduced 2009 capital expenditures to $500 million, down 50% compared to 2008 levels.
Bozotti further noted ST's plan to complete its wireless joint venture with Ericsson Mobile Platforms during the current quarter as a priority.
The company is planning for Q1 revenues in the range of $1.5 billion to $1.85 billion. ST said that as it works to reduce inventory levels in the quarter, fab loading will run at levels of about 50%, driving gross margin to an "extraordinary low level," which ST estimated will be in the mid to high 20s as a percentage of sales.
