STMicro sees better outlook, shares slip

PARIS, FRANCE: Shares in loss-making European computer chip maker STMicroelectronics slipped over 4.5 percent on Wednesday on market worries that a weakening dollar would hinder its return to break-even this year.

The group posted its seventh straight quarter of losses on Tuesday and declined on Wednesday to say when it would return to profit.

"Given their forecasts, I think they will reach break-even this year, but there is a risk that they go off-track, especially because of the currency impact," said one Paris-based analyst.

STMicroelectronics chief executive Carlo Bozotti told a conference call on Wednesday that each percentage of variation in the dollar-euro rate translated into an $8-10 million impact on the firm's operational result.

He said STMicro had expected chip sales to drop by 20 per cent this year but now sees the market shrinking by 17-18 per cent.

"If the Western hemisphere participates in the global recovery as Asia has, then I believe that the present positive trend in demand is sustainable," said Bozotti.

Analysts say chip orders are rising ahead of the holiday season and the imminent release of Microsoft Corp's new Windows 7 operating system, which could spur PC sales.

"We are confident that the industry recovery is gaining momentum and the worst of economic crisis is behind us," Bozotti said.

The stock was down 4.58 per cent at 6.29 euros at 1119 GMT, while the Dow Jones technology index was 0.8 per cent lower.

Other big chip makers including Intel Corp. and Texas Instruments Inc recently reported strong earnings.