ST Microelectronics have announced that their revenue for the fourth quarter would be below the outlook provided in the company’s news release dated October 28, 2008.
Based on current visibility, ST Microelectronics expect fourth quarter revenues to be between approximately $2.2 billion and $2.35 billion, as compared to $2.7 billion reported in the prior quarter, or a sequential change in the range of about -12.8% to -18.4%.
The revised revenue outlook is the consequence of a recent slowdown in the billings, substantial changes in customers’ demand and order push-outs for the month of December. This situation reflects the well-known weaknesses in the industry, across most geographies and market segments, and, in particular, in wireless, automotive and computer peripherals.
ST Microelectronics faced a reduction of manufacturing activity and reduced sourcing from third-party suppliers, when compared to planned activities while entering the quarter. As a result of higher unused capacity charges in the quarter, the gross margin expected for the fourth quarter 2008 is now about 38% plus or minus one percentage point.
Additionally, ST Microelectronics continue to implement cost-control initiatives and are progressing in their effort to capture the cost synergies from the recent creation of ST-NXP Wireless.
This outlook is based on an assumed effective currency exchange rate of approximately $1.40 = €1.00 for the 2008 fourth quarter, which reflects current exchange rate levels combined with the impact of existing hedging contracts. Additionally, as per the prior outlook for Q4 2008 released on October 28, 2008, this outlook includes the results of the ST-NXP Wireless joint venture - which began operations on August 2, 2008 - for the full quarter, but excludes an estimated $30 million cost in the fourth quarter 2008 due to inventory step-up purchase accounting adjustments related to the former NXP Wireless business.
Some of the statements in this release are statements of future expectations and other forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended) based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those in such statements due to, among other factors such as deterioration on the worldwide financial markets, economic recession in one or more of the world’s major economies, and the effect on demand for semiconductors.