ST, Moto, Qimonda, Spansion record significant losses

Harsh memory average selling prices, the weak dollar, and struggling sales of mobile devices cause less-than-stellar financial reports. Texas Instruments bucks trend with profit.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 1/23/2008

Red ink flooded the tech industry this morning as financial reports from several companies showed significant losses for 2007 and the December quarter.

STMicroelectronics, for one, late Tuesday reported a 2007 net loss of $477 million and $545 million operating loss, putting much of the blame on the weak dollar. ST showed net income of $782 million and operating income of $677 million for 2006. Revenue for 2007 was $10 billion, a 1.5% year-over-year increase.

“While we continue to make significant improvements in a number of areas -- such as our product portfolio competitiveness, capital intensity, manufacturing performance, and cost structure -- the financial benefits of our actions are difficult to see, as a rapidly weakening US dollar absorbs much of our progress,” Carlo Bozotti, ST president and CEO, said in a company statement. “We estimate that on a constant currency basis our 2007 operating profit, excluding restructuring and impairment charges, would have been about $310 million higher than the reported figure of $683 million and would have been about $240 million higher than the comparable operating profit figure of $754 million in 2006.”

Motorola also saw 2007 losses, in large part due to poor performance from its struggling mobile devices business. Indeed, Motorola has slipped to third place in recent mobile phone shipments rankings and has reported several quarters of financial woes due to the division. The Schaumburg, Ill.-based company today reported a $553 million operating loss and $49 million net loss on sales of $36.6 billion for the full year.

“We are focused on aggressively rationalizing the company’s cost structure and working to get mobile devices [business] back on track,” said Greg Brown, Motorola CEO, in a company statement. “The recovery in mobile devices will take longer than expected and there is a lot more work to be done. Our primary focus is on improving profitability and enhancing our product portfolio in this business.”

Reporting results for the December quarter and showing the impact of lower DRAM average selling prices  (ASP), Qimonda recorded an EBIT loss of $859 million (590 million Euro) compared to an EBIT loss of $376 million (258 million Euro) in the previous quarter and a positive EBIT of $364 million (250 million Euro) in the year-ago quarter. Net loss for the quarter, marking the memory maker’s fiscal Q1, was $871 million (598 million Euro), compared to a net loss of $386 million (265 million Euro) in fiscal Q4 2007 and net income of $258 million (177 million Euro) in fiscal Q1 2007. Sales decreased 28% to $747 million (513 million Euro) from $1 billion (711 million Euro) in the previous quarter and dropped 56% year over year from $1.7 billion (1.17 billion Euro).

“During the last quarter, the DRAM market saw a further drop of more than 40% in standard DRAM pricing, one of the strongest declines in a December quarter. Our previously announced measures were executed successfully, but could not compensate for this difficult market environment,” said Kin Wah Loh, president and CEO of Qimonda, in a company statement Tuesday.

Loh added that the Munich, Germany-based company significantly reduced cost per bit during the quarter by almost 20% based on strong bit shipment growth, productivity improvements in manufacturing and reduced operating expenses. “Furthermore, we converted more than 50 percent of our capacities to 80 nm and 75 nm by the end of December. We are on track with our plans to reach a conversion rate of 75% by March and 90% by September 2008,” he said.

Flash maker Spansion also took a hit on the harsh memory market, Tuesday reporting a 2007 net loss of $263 million, compared to a net loss of $148 million for 2006. However, on the bright side, the Sunnyvale, Calif.-based company claimed to have outperformed the overall NOR industry in 2007 as net sales declined only 3% to $2.5 billion from $2.6 billion in the same time period last year. For 2007, Spansion estimated that its NOR industry segment share increased from 31% to approximately 33%, driven by adoption of the company's MirrorBit technology as MirrorBit revenue for 2007 rose 41% to $1.8 billion compared to $1.3 billion in 2006.

Standing out from the crowd, Texas Instruments bucked the loss trend, reporting profit for 2007 after Tuesday’s closing bell. The Dallas-based company recorded gross profit was $7.33 billion, an increase of $74 million on 2006 as a greater percentage of TI revenue came from more-profitable analog and DSP products, and as the company reduced manufacturing costs. Operating profit was $3.5 billion, an increase of $130 million or 4% year over year. TI’s revenue was $13.83 billion, down 3% from 2006, due to lower revenue for RISC microprocessors, semiconductors used in cell phone applications, and DLP products.

“It was a good year for TI,” said Rich Templeton, TI president and CEO, in a company statement. “Perhaps most important to our future performance, we sharpened our focus on analog with increases in dedicated research and development, sales support and manufacturing capacity. Evidence of our potential in this area was notable in high-performance analog where we again made substantial market share gains. We move into the first quarter of 2008 expecting year-over-year growth to accelerate in our semiconductor operations.”