STMicroelectronics' second-quarter net profit of 420 million US dollars increased by 18% over the same period of last year

The financial report released by STMicroelectronics, the largest semiconductor manufacturer in Europe, showed that due to the increase in demand for automotive chips and the settlement payment from Credit Suisse Group, the company’s net revenue for the second quarter was US$2.57 billion, a year-on-year increase of 1.4%. Net profit reached US$420 million, an increase of 18% over the same period of last year.

STMicroelectronics said on July 9 that the company had received US$356.8 million in cash paid by Credit Suisse Group and that the two companies had settled all lawsuits concerning auction interest rate securities. The compensation is related to this lawsuit. Full compensation for all losses and costs. At the time, STMicroelectronics had expected the company's profit before tax for the second quarter to be approximately $329 million.

According to Carlo Bozotti, CEO of STMicroelectronics, STMicroelectronics' third-quarter revenue and gross profit margin are expected to be “reduced” due to a significant decline in its major customer Nokia. Bozotti expects that the company’s demand from Nokia will decline significantly compared to previous expectations. Nokia is the largest customer of STMicroelectronics. Since the product is difficult to compete with Google Android platform mobile phones and Apple smartphones, Nokia has decided to abandon its own Saipan platform and move to accept Microsoft's smart phone mobile operating system. In the implementation of this strategic transformation, Nokia's market share is losing to rival Apple.

Saverio Papagno, analyst at AZ Fund Management, Luxembourg's investment management agency, said: “Nokia’s performance expectations for STMicroelectronics have had a significant impact. The visibility is still very low and it’s hard to say at this time. It is clear whether the decline in demand will only affect the third quarter or will affect the future longer.” Nokia's financial report released on July 21 showed that it had fallen into the first quarter of 2009 since the previous quarter. Exane BNP Paribas, a securities division of BNP Paribas, today downgraded STMicroelectronics from "neutral" to "weaker than". Jerome Ramel, an analyst at the financial institution, said that STMicroelectronics expects "poor" in the third quarter and that gross profit margin "falls."

STMicroelectronics' performance was not only hampered by customers' Nokia performance, but also affected by the loss of its company ST-Ericsson. ST-Ericsson is a chip joint venture between STMicroelectronics and Ericsson. Since its establishment in 2009, the company has been struggling to achieve profitability. However, Bozotti is optimistic about the future performance of ST-Ericsson. Bozotti said at today’s corporate earnings conference call that STMicroelectronics will be committed to ST-Ericsson and expects that the joint venture will have “significant growth” in next year’s revenue and “will definitely improve”. ST-Ericsson announced a cost-saving plan last month with the goal of saving $120 million a year. Implementing the plan will affect the company’s 500 employees worldwide.