STMicroelectronics Reports 2014 4Q, Full Year Financial Results

STMicroelectronics reported financial results for the fourth quarter and full year ended Dec. 31, 2014.
 
Fourth quarter net revenues totaled $1.83 billion, gross margin was 33.8%, and net income per share was $0.05. For the full year 2014, net revenues totaled $7.40 billion, gross margin was 33.7%, and net income per share was $0.14.
 
“Overall, 2014 was a year in which we made significant steps forward,” commented Carlo Bozotti, STMicroelectronics president and CEO.
 
“Thanks to the talent and product leadership drive of our employees, we have built a more focused, market-driven portfolio of sense, power, automotive products and embedded processing solutions. New flagship products during this past year included our 32-bit microcontrollers for general purpose and automotive applications, MEMS microphones, touch-screen controllers, ultra-HD products for set-top box and low voltage power MOSFETs and IGBTs. On a year-over-year basis, revenues in 2014 for the Microcontrollers and Automotive Groups increased by 10% and 8% respectively, with the Industrial & Power Discrete Group growing as well.
 
“We captured numerous key design wins for new products and functionality at existing customers. We also enlarged our customer base, through an expansion of market reach and our ability to seize opportunities for application diversification, including the Internet of Things. Our customer base expansion was demonstrated by the strong performance from distribution that grew to 31% of revenues in 2014 from 26% in 2013.
 
“ST is making solid progress on key performance and financial metrics. We met our operating expense target levels earlier than planned, achieved a significant turnaround in operating income, net income and cash flow, improved gross margin and operating margin and maintained our financial flexibility.”
 
Fourth Quarter Review

Net revenues decreased 3.0% sequentially. By region of shipment, Greater China & South Asia increased 3.2%, while the Americas, Japan & Korea, and EMEA decreased by 6.8%, 8.1%, and 8.9%, respectively, on a sequential basis. As anticipated, net revenues in the fourth quarter benefited from a one-time $13 million licensing payment.
 
On a year-over-year basis, net revenues decreased 9.2%, reflecting the combination of the phase-out of legacy ST-Ericsson products as well as lower DCG sales, specifically set-top box, and AMS sales on product pruning and product generation transition.
 
Fourth quarter gross profit was $619 million and gross margin was 33.8%. On a sequential basis, gross margin decreased 50 basis points, primarily reflecting price pressure and higher unused capacity charges in digital technology partially offset by manufacturing efficiencies and favorable currency effects. On a year-over-year basis, gross margin improved 90 basis points, reflecting the combined benefits of manufacturing efficiencies and favorable currency effects, offset in part by price pressure and unused capacity charges.

Full Year 2014 Results
 
Net revenues of $7.40 billion for the full year 2014, represented a decrease of 8.4% in total and a decrease of 1.8% excluding the phase-out of legacy ST-Ericsson products, with solid growth experienced in MMS and APG supported by IPD.
 
Gross margin improved 140 basis points to 33.7% of net revenues for the full year 2014, compared to 32.3% of net revenues in 2013, with the margin expansion reflecting manufacturing efficiencies and favorable currency effects.
 
Operating income in 2014 improved significantly to positive $168 million from negative $465 million in 2013 mainly driven by lower operating expenses as a result of the exit of the ST-Ericsson joint venture and cost savings initiatives.
 
Sense & Power and Automotive revenues for the full year 2014 totaled $4.77 billion, flat compared to 2013 with growth in APG and IPD offset by lower AMS sales principally reflecting portfolio pruning and product generation transition. SP&A operating margin increased to 9.4% in 2014 from 5.7% in 2013 principally reflecting significant improvement across a number of product families.
 
Embedded Processing Solutions revenues were $2.61 billion, a decrease of 20.2% in total and a decrease of 4.4% excluding the phase-out of ST-Ericsson legacy products, with a strong increase in MMS product sales offset by a significant decline of DCG and IBP revenues. EPS operating margin in 2014 improved to a negative 3.9% compared to negative 12.2% in 2013 mainly due to the wind down of ST-Ericsson, cost reduction initiatives and funding for Nano2017.
 
Net income, as reported, was $128 million in the full year 2014, or $0.14 per share, compared to a net loss of $500 million, or $(0.56) per share in the full year 2013. On an adjusted basis, ST reported a non-U.S. GAAP net income per share estimated at $0.29 excluding impairment and restructuring charges and one-time items, net of estimated income tax effect, in the full year 2014, compared to $(0.23) in the full year 2013.*
 
First Quarter 2015 Business Outlook
 
“Based upon our backlog, current plans of customers as well as the overall semiconductor market environment, we expect revenues in the first quarter of 2015 to decrease sequentially by about 5% at the mid-point, which is better than our normal seasonal evolution,” Bozotti said. “Our main objective during 2015 is to continue to deliver year-over-year improvement, by returning to revenue growth and by continuing to improve our cost structure.”
 
First quarter 2015 revenues are expected to decrease about 5% on a sequential basis, plus or minus 3.5 percentage points, and reflect no one-time licensing revenue compared to the fourth quarter, ST’s high exposure to New-Year holidays in Asia as well as its shorter accounting calendar for the first quarter. Gross margin in the first quarter is expected to be about 33.2%, plus or minus 2.0 percentage points and reflects still high unsaturation charges negatively impacting gross margin by about 120 basis points.