STMicroelectronics Loss Widens Amid Ongoing Shift

STMicroelectronics NV's (STM, STM.MI, STM.FR) second-quarter loss widened, as the chip maker continued a push to refocus itself on making electronic sensors and new technology for making smaller transistors.

STMicro, Europe's largest semiconductor maker by revenue, saw 3.6% in revenue growth at its businesses outside of its soon-to-be discontinued wireless segment, reflecting better than normal seasonal demand.

Chief Executive Carlo Bozotti said the latest quarter's results reflect new product launches and efforts to expand geographic and customer coverage with new accounts and distributors.

The Franco-Italian company has been reeling for the last two years from its ST-Ericsson joint venture with Sweden's Ericsson (ERIC). The JV, which makes communications chips for mobile phones, has seen sales tumble as customers BlackBerry Ltd. (BBRY, BB.T) and Nokia Corp. (NOK, NOK1V.HE) hit the skids. The two companies agreed earlier this year to pull the plug and exit the four-year-old venture.

Investors have cheered that announcement, along with signs that global semiconductor demand is growing, pushing STMicro's stock close to two-year highs. But the company still faces long-term concerns over profitably filling capacity at plants in both Italy and France where labor costs are high.

STMicro executives say they believe such plants can be made profitable by using them to produce next-generation technologies that aren't yet commoditized. On Monday, for instance, STMicro said that it will invest 1.3 billion euros ($1.71 billion) in a five-year research and development program into nanotechnology, alongside other research institutions and the French government, which itself is kicking in EUR600 million ($788 million).

In the first quarter, STMicro reported a loss of $152 million, or 17 cents a share, compared with a year-earlier loss of $75 million, or eight cents a share. The latest quarter included a charge of $89 million on equity investments, mostly related to impairment charges recorded by 3Sun, a joint venture with Enel Green Power SpA (ELPSY, EGPW.MI) and Sharp Corp. (SHCAY, 6753.TO) that makes solar panels.

Excluding restructuring charges and other one-time items, the company's per-share loss was six cents, compared with five cents a year ago.

Sales fell by 4.8% to $2.05 billion, in line with the company's guidance of revenue between $2 billion and $2.14 billion.

Gross margin narrowed to 32.8%, compared with 34.3% a year earlier.

Mr. Bozotti said outside of the ST-Ericsson joint venture, bookings improved progressively during the second quarter, though the smartphone market softened toward the end of the period.

For the current quarter, the company projected revenue roughly flat with the second quarter, indicating around $2.05 billion.

Shares were off four cents to $9.75 in after-hours trading. Through the close, the stock was up 35% since the start of the year.

Write to Kristin Jones at [e-mail]

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