STMicroelectronics. Citigroup Technology Conference. Carlo Ferro Chief Financial Officer September 3, 2008

Transcription

1 STMicroelectronics Citigroup Technology Conference Carlo Ferro Chief Financial Officer September 3, 2008

2 STMicroelectronics Global Presence* Q208 Revenues = $2.39B 13% North America Carrollton Phoenix Malta Morocco 29% Europe 26% Greater China France (Crolles I & II, Rousset, Tours) Italy (Agrate, Catania) China 21% Asia Pacific 15 main production sites 16 advanced R&D centers 39 design and application centers 78 direct sales offices in 36 countries Listed on NYSE Euronext (New York & Paris), Borsa Italiana Malaysia 7% Emerging Markets** Singapore 5% Japan * Sales by region of destination as % of Q208 sales (Percentages may not equal 100% due to rounding) ** India, Russia, Africa, Latin America, Middle East 2

3 Revenues by Market Segment* Q208 Sales: $2.39B 32% 17% 16% Industrial Segment +20% Telecom +19% Computer +12% Consumer +11% Automotive +7% #1 Industrial Y-o-Y Growth 2007 Ranking 18% 17% #3 Wireless #3 Automotive #4 Digital Consumer Automotive Computer Consumer Industrial Telecom * The above chart estimates, within a variance of 5% - 10% in the absolute dollar amount, the relative weighting of each of the Company s target market segments 3

4 Gaining Market Share ST vs. Total Available Market (TAM) 20% 15% 14.6% 13.2% 10% 8.0% 9.7% 5% 3.0% 5.4% 0% Q208 / Q207 Q208 / Q108 1H08 / 1H07 TAM ST Source: ST, WSTS June

5 Assets Lighter Strategy Increasing use of silicon foundry: Approximately 8% of wafers out in Q208 to about 20% at end 2009 Partnership / IBM alliance Acceleration of manufacturing restructuring Target $150 million COGS savings at completion Number of fabs down from 17 in 2005 to 8 at completion 45% Reduced Cap Ex to Sales Ratio 40% 35% 30% ST Average = 26% 25% 20% 15% Avg.=16% 07= 11.4% 10% 5% 2008e 10% 0% e CapEx as % of Revenues 5

6 Portfolio Management Actions in 2008 Merger & Acquisition Divestitures ~ $200M sales Accretive 2009 Wireless FY07 Sales ~ $1.5B FY07 EBIT ~ $100M + Synergies ST FY07 Sales ~ $1.3B Negative EBIT in 2007 Mobile Platforms Consolidated FY07 Sales ~ $600M + Synergies 6

7 Addressing Profitability* by Segment High Margin Memories Company Average, Last Twelve Months Analog EBIT % < ST Average EBIT **% Digital EBIT % > ST Average Gross Margin Discrete Imaging Flash*** Op Expenses *Not drawn to scale **Excludes restructuring costs ***Including impact of AHFS accounting 7

8 ST NXP EMP Wireless Merger 8

9 ST & Ericsson: Creating a New World Leader Merging Ericsson Mobile Platforms and ST-NXP Wireless Industry s strongest product offering Industry s strongest customer base Building on current partnership 50/50 joint venture Strong endorsement from key customers Pro forma sales in 2007 of US$ 3.6 billion About 8,000 employed, majority in R&D 9

10 ST-NXP Wireless Today Pro forma sales 2007 of US$ 3 billion Almost 8,000 employed About 3,800 in R&D Headquarters in Geneva Major sites in France, India, the US, and the Netherlands, and plants in Malaysia and the Philippines Main business Major supplier to Nokia 2G, 2.5G, EDGE and 3G supplier to Samsung Baseband and RF ASIC supplier to EMP 2G, 2.5G, EDGE and TD-SCDMA supplier to the China market Multimedia and connectivity supplier to top handset manufacturers 10

11 Ericsson Mobile Platforms today Sales 2007 of SEK 3.7 billion Roughly 3,000 employed About 2,700 in R&D Headquarters in Lund, Sweden Main sites in Sweden, UK, Germany and the US Main business 3G, HSPA and LTE technologies 3G, HSPA platform supplier to Sony Ericsson 3G, HSPA platform supplier to LG and Sharp 11

12 Strong Rationale for JV ST Leading supplier to Nokia Samsung and Sony Ericsson Industry-leading RF, analog, multimedia and connectivity World-class 2G/EDGE platforms and strong 3G offering Ericsson Leading supplier to Sony Ericsson, LG, Sharp Industry-leading 3G and LTE platform technology Leading IPR portfolio Combination of ST & Ericsson Technology leader 2G, EDGE, 3G, HSPA and LTE Clear scale advantage Complete platform offering RF, analog, modem, multimedia, connectivity Strong customer base Nokia, Samsung, Sony Ericsson, LG and Sharp and other exciting leaders Leverage semiconductor technology, manufacturing and infrastructure from ST Perfect fit, with synergies 12

13 ST s Rationale Expands leadership from 2G and 3G to HSPA and LTE Strengthens IPR portfolio Exciting growth potential Competitive position in growing market Synergies in product portfolio Net positive cash flow with enhanced profitability, driven by strong long-term growth potential 13

14 The Deal Cash payment US$ 0.7B ST-NXP Wireless US$ 1.2B Net assets Cash/Debt free EMP Cash/Debt free Cash payment US$ 1.1B Joint venture Cash of US$ 0.4B 14

15 Strategic Investment Consideration to NXP in exchange of 80% net of financial assets Expected payment to buy-out 20% of ST NXP wireless Compensation to be paid by Ericsson to ST 50% of residual Cash in JV (1.52) B$ < (0.5) B$ 0.7 B$ 0.2 B$ Net Investment in the range of $1 billion Fully funded by outstanding cash 15

16 M$ 6,000 5,000 4,000 3,000 2,000 1, Qualcomm Texas Instruments Falcon STMicroelectronics Infineon Technologies NXP NXP MediaTek Broadcom Freescale Semiconductor RF Micro Devices Renesas Technology Skyworks Solutions CSR Marvell Technology Group Intel Samsung Electronics 2007 Wireless Sales Comparison EMP Sales ST-NXP Wireless Sales NewCo Source: isuppli, ST, Ericsson

17 Q Results

18 Revenues by Product Segment Excluding Flash ASG: +8.4% Q/Q, +15.9% Y-o-Y Strong growth driven by wireless (3G DBB, connectivity) and consumer (PND) IMS: +11.9% Q/Q, +12.8% Y-o-Y Strong growth driven by MEMS, smartcards/mcu & advanced analog 2,500 2,000 US$M 1,500 1, Q105 Q106 Q107 Q108 * Based on mid-point of company guidance Q205 Q206 Q207 Q208 Q305 Q306 Q307 Q308 (est.*) ASG IMS Other Q405 Q406 Q407 18

19 Key Customers & Regions Q208 Results Excluding Flash Strong improvement in all key sales initiatives New Major Key Accounts Japan Sales: +36% sequentially +73% Y-o-Y Sales: +12% sequentially +33% Y-o-Y Mass Market Greater China Sales: +18% sequentially +20% Y-o-Y Sales: +11% sequentially +7% Y-o-Y* *Transnational customer request to change shipment location from Greater China region 19

20 New Products: Wireless Baseband 3G Digital Baseband 3X unit growth expected in 2008 ST continues to be a strategic partner to Ericsson Mobile Platforms (EMP) in technology nodes beyond 90nm Analog Baseband working to develop a future high-volume EMP platform Imaging Moving to higher resolution sensor Design win for 5MP sensor Diversifying customer base Application Processor Ramping in mobile phone and automotive applications Connectivity WLAN handset market share >30% Bluetooth handset market share from standing start to >10% in 2 years ST connectivity products designed-in >150 phones; over half on the market today Ramping up Bluetooth headsets 20

21 MORE New Products Digital Consumer Set-top Box Strong H.264 (SD/HD) sales; transition from MPEG-2 to H.264 will continue throughout 2008 Sampled four different products in 65nm to worldleading set-top-box manufacturers Digital TV Addressing market with STB plug-in solutions (SD/HD) Genesis integration ongoing; integrating image and video processors into ST s product offering Nomadik-based Cartesio: embedded-gps application processor ramping in portable navigation devices for Garmin Computer Peripherals Data Storage 90nm SoC ramping in volume now Printers New design wins in the US for SPEAr processor in printers & networking applications 21

22 MORE New Products MEMS Very well positioned in Gaming, supplying sensors for the Nintendo Wii Serving a differentiated customer base with new design-wins for sensors in game controllers and a consumer application Introduced a Gyroscope angular-rate sensor offering extended voltage range and reduced standby power Industrial Advanced analog: numerous design-wins for logic switches and translators in computer and communications applications Power applications: several design-wins for MOSFETS including high-end desktop PCs Automotive New design-wins in powertrain and car body applications (dynamic vehicle control & ABS platform for a major Japanese manufacturer; smart actuators in body-control modules in China and India) 22

23 Financial Performance As Reported In US$M, except EPS Q207 Q108 Q208 Net Revenues 2,418 2,478 2,391 Gross Margin 34.7% 36.3% 36.8% Operating Expenses / Sales (excluding in-process R&D in Q108) 29.6% 31.9% 31.4% Operating Margin* (before impairment, restructuring & other charges) 5.5% 4.7% 6.7% Net Income EPS Diluted (before impairment, restructuring & other charges) ** Pre-tax restructuring & total impairment charges*** Effective Exchange Rate / $ * Accounting for Assets of Flash Memory Business Held for Sale started in June The pro-forma operating margin excludes impairment, restructuring and inprocess R&D charges of $906M for Q207, $204M for Q108 and $185M for Q208. ** In addition to the charges for impairment, restructuring and in-process R&D, diluted EPS also excludes the other-than-temporary impairment of financial assets, a pre-tax charge, of $29M in Q108 and $39M in Q208. *** Includes charges related to the deconsolidation of FMG of $857M in Q207, $164M in Q108 and $35M in Q

24 Currency Impact on Profitability US$M $1.75 $1.50 $1.25 $1.00 $0.75 $300 $250 $200 $150 $100 $50 $ Effective Exchange Rate ($ to Euro) $1.33 $ Q Q Q208 Effective Exchange Rate ($ to Euro) Y-o-Y Currency Impact (Est.) EBIT** +37% 1.55 In US$ M & % Effective $/Euro Net Revenues Gross Profit Gross Margin R&D SG&A Operating Income (Proforma)** Estimated Q208 results at Q207 exchange rate*: $1.33 2, (431) (252) 293 Q208 as reported: $1.55 2, (470) (281) 159 Q207 ex FMG: $1.33 2, (397) (243) 159 *The above chart reflects non-gaap best estimates of exchange rate impact on selected financial metrics for ST. Net revenues is based on the assumption that industry prices adjust to equivalent US$ prices with a delay of one quarter. **Pro-forma EBIT excluding impairment & restructuring charges is a metric management believes represent a meaningful comparison of operating performance. The Q207 amount is derived by adding $906 million in impairment & restructuring charges to the reported operating loss (excluding FMG) of $747 million; while the Q208 amount comes from the addition of $185 million in impairment & restructuring to the reported operating loss of $26 million. 24

25 Year-over-Year Comparison (ex FMG): EBIT before Impairment & Restructuring US$M 71% of incremental revenues (ex FMG) Q Operating Income* -134 Currency Genesis Operating Improvements Q Operating Income* * Q207 and Q208 Operating Profit before impairment & restructuring charges of $906 million and $185 million, respectively 25

26 Generating Cash US$M Net Operating Cash Flow* % 8% % % 200 2% 0 0% H08 NOCF* NOCF/Sales (%) NOCF* (ex Genesis) *Non US GAAP measure defined as: Net cash from operating activities minus net cash used in investing activities excluding payments for purchase of and proceeds from the sale of marketable securities and short term deposits. 26

27 Distributing Wealth Current dividend = $.09 per quarter: 20% growth Y-o-Y 2007 Yield ~ 2.7%* Payout ~ 46% of 2007 Clean Net Earnings** Moving from annual to quarterly payments 73% dividend increase from 2005, despite adverse currency Share repurchase started; 30 million shares authorized $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $ Dividends 2003 Dividend Yield % 2% 1% 0% *Yield calculated using ST s share price as of September 2, annualized dividend is payable in four equal installments: May, August and November 2008 and February **2007 clean net earnings excludes impairment, restructuring and one time costs and other-than-temporary impairment charge 27

28 Outlook Q308 revenues to increase sequentially in the range between -1% and +6% Q308 gross margin expected to be equal to 36.8% +/- 1 percentage point 2008 capex to sales ratio at or below 10% Q308 outlook based on: Expected effective currency rate of about $1.57 = 1 ST as configured entering the quarter. It does not include any impact of the ST-NXP Wireless joint venture, which closed on August 2 nd,

29 Current and Future Opportunities Accelerated revenues growth just started Numonyx deconsolidation complete Genesis acquisition complete, integration ongoing ST-NXP Wireless businesses to integrate: $250M in synergies ST-NXP Wireless/EMP to merge: growth opportunities New product contributions: Wireless (3G Digital Baseband, Connectivity) Multimedia processor / Navigation applications MEMS High margin analog to continue to grow $150M in COGS savings to be realized from fab restructuring Further adjustment to Op Ex cost structure 29

30 ST s Financial Overwiew FINANCIAL OBJECTIVES: Return On Net Assets 12% to 20% Cash generation and distribution to shareholders CHALLENGE/OPPORTUNITY: Euro/$ rate absorbed $134 M per quarter of Y-o-Y EBIT improvement in Q208 VALUE CREATION DRIVERS: Sales Expansion Cost Restructuring Portfolio Management Lighter Asset Strategy FOCUS ON EXECUTION SHAREHOLDER VALUE CREATION 30

31 Forward Looking Statements Some of the statements contained in this release that are not historical facts 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: future developments of the world semiconductor market, in particular the future demand for semiconductor products in the key application markets and from key customers served by our products; the results of actions by our competitors, including new product offerings and our ability to react thereto; curtailments of purchases from key customers or pricing pressures which are highly variable and difficult to predict; the financial impact of obsolete or excess inventories if actual demand differs from our anticipations; the impact of intellectual-property claims by our competitors or other third parties, and our ability to obtain required licenses on reasonable terms and conditions; the outcome of ongoing litigation as well as any new litigation to which we may become a defendant; our ability to close as planned in the third quarter of 2008 the purchase of the wireless business of NXP Semiconductors, which we announced on April 10, 2008, as well as our ability to sign and close an agreement for the sale of our manufacturing facility in Phoenix (AZ) in accordance with the currently envisaged terms; changes in the exchange rates between the US dollar and the Euro, compared to an assumed effective exchange rate of US $1.57 = 1.00 and between the U.S. dollar and the currencies of the other major countries in which we have our operating infrastructure; our ability to manage in an intensely competitive and cyclical industry, where a high percentage of our costs are fixed, incurred in currencies other than US dollars which is our reporting currency and difficult to reduce in the short term; our ability to adequately utilize and operate our manufacturing facilities at sufficient levels to cover fixed operating costs; our ability to restructure in accordance with our plans if unforeseen events require adjustments or delays in implementation; our ability in an intensively competitive environment to secure customer acceptance and to achieve our pricing expectations for high-volume supplies of new products in whose development we have been, or are currently, investing; the ability of our suppliers to meet our demands for supplies and materials and to offer competitive pricing; significant differences in the gross margins we achieve compared to expectations, based on changes in revenue levels, product mix and pricing, capacity utilization, variations in inventory valuation, excess or obsolete inventory, manufacturing yields, changes in unit costs, impairments of long-lived assets (including manufacturing, assembly/test and intangible assets), and the timing, execution and associated costs for the announced transfer of manufacturing from facilities designated for closure and associated costs, including start-up costs; changes in the economic, social or political environment, including military conflict and/or terrorist activities, as well as natural events such as severe weather, health risks, epidemics or earthquakes in the countries in which we, our key customers and our suppliers, operate; changes in our overall tax position as a result of changes in tax laws or the outcome of tax audits, and our ability to accurately estimate tax credits, benefits, deductions and provisions and to realize deferred tax assets. Such forward-looking statements are subject to various risks and uncertainties, which may cause actual results and performance of our business to differ materially and adversely from the forward-looking statements. Such forward-looking statements can be identified by the use of forward-looking terminology such as believes, may, will, should,, would be or anticipates or similar expressions or the negative thereof or other variations thereof, or by discussions of strategy, plans or intentions. Some of the risk factors we face are set forth and are discussed in more detail in Item 3. Key Information Risk Factors included in our Annual Report on Form 20-F for the year ended December 31, 2007, as filed with the SEC on March 3, Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this release as anticipated, believed or expected. We do not intend, and do not assume any obligation, to update any information or forward-looking statements set forth in this release to reflect subsequent events or circumstances. Unfavorable changes in the above or other factors listed under Risk Factors from time to time in our SEC filings, including our Form 20-F, could have a material adverse effect on our results of operations or financial condition 31