24 January 2012
ST-Ericsson in 'crucial phase' warns Bozotti
STMicroelectronics' president and CEO, Carlo Bozotti has warned that ST-Ericsson is now in what he describes as a 'crucial phase'.
Bozotti made the statement in a report on ST's Q4 and full year 2011 financial results, in which it achieved record revenues for automotive applications and MEMS.
Bozotti conceded that managing the wireless joint venture's shift from a legacy portfolio to the new product roadmap has proven more challenging than expected, given the change in the business of one of its largest customers and its evolving plans. "While the new portfolio is beginning to ramp," he said, "the current results of ST-Ericsson are still distant from the financial prospects we are envisioning. Therefore, ST-Ericsson is now in a crucial phase focusing on improving execution, lowering its break-even point and reviewing its roadmap to sustainable profitability. We are confident that the newly appointed chief executive officer of ST-Ericsson is the appropriate leader to drive this turnaround." ST-Ericsson recently announced the replacement of Gilles Delfassy with operations chief, Didier Lamouche - the third ceo since the joint venture was formed in 2009. In this time the company never made a quarterly profit and constantly reduced costs.
Bozotti added: "In 2011, our wholly owned businesses delivered a solid performance throughout the year, within the backdrop of a severe slowdown in the broader semiconductor market as the year evolved. ST's wholly owned businesses delivered revenue of $8.2billion and an operating margin of 11.4%."
Bozitti added that the company expected to see strong growth during 2011 in two of its key strategic product areas. "Our MEMS sales nearly doubled to over $600million," he said. "Our automotive business reported record revenues, with sales up 18% during 2011, on top of sales growth of over 40% during 2010. In both areas, revenue growth was also accompanied by a significant expansion of the operating profitability of these product groups."
ST's total financial resources for 2011 were $2.3billion, with a net financial position achieving $1.17bn, as adjusted, taking into account the 50% of ST-Ericsson's debt. "As anticipated," noted Bozitti, "we saw an improvement in the fourth quarter in inventory levels and inventory turns and capital expenditures are back down to much lower levels as planned."