STMicroelectronics posts loss, cutting 4,500 jobs worldwide

Swiss chip maker STMicroelectronics NV said Tuesday it is cutting about 4,500 jobs worldwide after it posted a fourth-quarter net loss Tuesday, reversing a year-ago profit as revenue slipped amid the global economic turmoil.

The job cuts represent about 9 percent of the Geneva-based company’s work force.

The company posted a loss of $366 million, or 42 cents per share, down from a profit of $20 million or 2 cents per share, in the same period a year earlier.

Revenue fell 17 percent to $2.28 billion from $2.74 billion.

Excluding restructuring and impairment charges and other items, the quarter’s net loss totaled 6 cents per share.

Analysts, on average, were expecting a profit of 3 cents per share on sales of $2.23 billion, according to a poll by Thomson Reuters. Analysts typically exclude one-time items from their estimates.

STMicro said all product areas were hurt by the downturn, especially the automotive, wireless and computer peripherals markets.

For the full year, the company posted a net loss of $786 million, or 88 cents per share, compared with a loss of $477 million, or 53 cents per share, a year earlier.

Sales slid less than 2 percent to $9.84 billion from $10 billion.

Looking ahead, STMicro said it is targeting first-quarter sales of $1.5 billion to $1.85 billion. Analysts are predicting $2.06 billion. The company did not provide a forecast for earnings per share.

The company said it plans to reduce costs by more than $700 million in 2009.

Based on the company’s 52,180 employees according to CapitalIQ, the job cuts represent about 9 percent of STMicro’s global work force.

Shares slid 12 cents, or 2.1 percent, to $5.51 in after-hours trading. The stock had closed up 14 cents at $5.63.

via Associated Press, Bloomberg reports more:

Jan. 28 (Bloomberg) — STMicroelectronics NV, Europe’s largest maker of semiconductors, plans to cut about 4,500 jobs this year as the recession curbs demand for mobile-phone and automotive chips.

First-quarter sales will drop as much as 39 percent to between $1.5 billion and $1.85 billion, the Geneva-based company said yesterday in a statement. Analysts had predicted $1.98 billion, the average estimate compiled by Bloomberg. The company also reported a fourth-quarter loss on falling sales.

“At last STM is joining others in cutting costs more aggressively,” UBS AG analyst Nicolas Gaudois wrote in a note today. With a forecast of falling gross profit margin this quarter and expenses still high, the cutbacks may be “too little too late.” The brokerage recommends selling the shares and today cut its target price to 3.70 euros from 4.10 euros.

STMicroelectronics aims to save more than $700 million this year. The company has more than 45,000 employees, according to its Web site. The slump has prompted research firm Gartner Inc. to predict a 16 percent drop in worldwide chip sales this year. Chief Executive Officer Carlo Bozotti forecast today the market will drop “more than 20 percent” in 2009.

“All product areas were negatively affected, in particular automotive, wireless and computer peripherals,” the CEO said in the release. Customers increasingly delayed and canceled orders as the quarter went on, he said.

Wider Loss

The fourth-quarter net loss totaled $366 million, or 42 cents a share, compared with net income of $20 million, or 2 cents, a year earlier. Sales fell 17 percent to $2.28 billion. Analysts predicted a loss of $39 million on sales of $2.27 billion, the average estimates in the Bloomberg survey.

STMicroelectronics fell 1.3 percent to 4.25 euros at 10:39 a.m. in Milan. Before today, the stock had dropped 48 percent in the past year, compared with a 34 percent decline in the Bloomberg Europe Technology Index.

“The sector has always been one of the most heavily affected during recessions,” Aurelio Matrone, an analyst at Banca Akros, wrote yesterday. “We expect a strong pressure on margins and free cash flows for the next quarters.”

Bozotti said the company hasn’t decided yet on its dividend payment, adding it will take several elements into account, including the market trend. STMicroelectronics paid a dividend of 36 cents on 2007 earnings.

Narrower Margin

The economy makes it difficult to forecast the current period, STMicroelectronics said.

The first-quarter gross margin, or the percentage of sales remaining after production costs, will be in the “mid to high 20s,” the company said. That’s narrower than the fourth quarter’s 37.5 percent margin, excluding some costs related to former affiliates.

“Asia, China will be particularly weak in the first quarter,” the CEO said on a conference call today.

STMicroelectronics is cutting 3,500 jobs in manufacturing and 1,000 in research and development and other departments, the CEO said. It doesn’t plan to close more plants, he said.

Since December, the company has halved the level of production at facilities, and it may cut the “fab loading” further if needed, Bozotti said.

The chipmaker shut its plants in Italy over the Christmas period, affecting about 8,000 workers, after saying in November that it would cut output to adjust to lower demand and reduce the use of outside contractors. It will spend $500 million in 2009 on new plants and equipment, down 50 percent from 2008.

Automotive Woes

Fourth-quarter automotive sales declined 27 percent from a year earlier. Revenue from computers dropped 20 percent, while telecommunications sales fell 17 percent. The consumer business slid 12 percent, and industrial revenue declined 8 percent.

Texas Instruments Inc., the second-largest U.S. chipmaker, announced plans to cut 12 percent of its jobs this week. Slumping demand for mobile-phone chips led the Dallas-based company to eliminate 1,800 positions and shed an additional 1,600 through voluntary retirements.

Intel Corp., the world’s largest chipmaker, said last week it will close five factories that employ as many as 6,000 people, including its last plant in Silicon Valley. Reduced demand for personal-computer chips has forced the Santa Clara, California- based company to run operations below capacity.

Nokia Oyj, the world’s biggest mobile-phone maker and STMicroelectronics’ largest customer, reported last week that profit fell more than analysts had estimated. Nokia reduced its dividend for the first time in seven years and forecast a 10 percent slide in industry sales in 2009.

STMicroelectronics has now reached a “record” market share of 6.7 percent to 6.8 percent, Bozotti said.

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