STMicro delivers strong revenue forecast

SAN FRANCISCO, USA: European chipmaker STMicroelectronics swung to a profit in the second quarter and delivered a stronger-than-expected sales forecast.

The Franco-Italian company said sales of chips to automotive and industrial customers grew briskly during the second-quarter, even as its wireless chip joint venture continued to lose money.

STMicro said net revenue in the three months ending June 26 totaled $2.53 billion, compared to $1.99 billion in the year-earlier period, and slightly below the $2.59 billion expected by analysts polled by Thomson Reuters I/B/E/S.

Chief Executive Carlo Bozotti said in a statement that the company was encouraged by the quality of its order backlog, and was continuing to add manufacturing capacity to support strong customer demand.

The company said it expects revenue in the third quarter to increase 2 percent and 7 percent sequentially, suggesting a range of $2.58 billion to $2.7 billion. The midpoint of the range was above the $2.6 billion expected by analysts.

STMicro's results come after rivals Intel and Advanced Micro Devices Inc  reported forecast-beating results for the quarter, fueling optimism about the chip sector.

STMicro, the world's fifth-largest chip maker, has focused on cutting costs and said its gross profit margin was 38.3 percent in the second quarter, compared to 37.3 percent in the first quarter.

The chipmaker recently said during an investor presentation in London it was seeing strong demand for the third quarter and a normal build-up of orders for the fourth quarter

Yet like rival chip makers it is wary of a reprise of a decade ago when the industry tacked on too much capacity too quickly and was then burned when demand waned.

STMicro reported net income of $356 million in the second quarter that included a $264 million net gain that was primarily due to the sale of its 48.6 percent stake in the Numonyx memory chip business to Micron Technology Inc. In the second quarter of 2009, STMicro had a net loss of $318 million.

It was not immediately clear how STMicro's net income compared to the average analyst expectation of $134.3 million.

STMicro, whose gyroscope chip is believed to be inside Apple Inc's hot-selling new iPhone4, said sales in its industrial and multisegement division posted a 56 percent year-over-year increase in sales, while the division that makes automotive, consumer and communications chips saw revenue grow 47 percent.

But the company's joint venture with Sweden's Ericsson making wireless radio chips for mobile phones continued to struggle.

ST-Ericsson reported separately that it incurred a net loss of $139 million in the second quarter, as sales declined roughly 18 percent year-over-year to $544 million.

ST-Ericsoon, whose customers include Nokia and LG Electronics, has been restructuring in recent quarters and is revamping its product portfolio partly to meet growing demand for smartphones.