(Corrects 6th para to show European technology index was up 0.5
percent, not down 0.5 percent)
* Companies stepping up spending on chips this year
* Forecast for third quarter disappoints some analysts
* Chipmaker's shares fall 3.9 percent
* Franco-Italian firm posts first profit in 11 quarters
By Leila Abboud and Gwénaëlle Barzic
PARIS, July 23 European chipmaker
STMicroelectronics forecast revenue growth of about 3
percent in the third quarter, disappointing some analysts who
expected a bigger lift from strong global demand for
The Franco-Italian company gave the guidance after posting
second-quarter revenue and profit that met expectations, driven
by sales of chips for cars and industrial products.
It said it was targeting third-quarter revenue growth of 3
percent, compared with the second quarter - plus or minus 3.5
percentage points; and a gross margin of 34.4 percent - plus or
minus 2 points.
The revenue growth guidance was more modest than some
analysts had expected given many companies are stepping up
spending on a wide variety of chips this year, including for
smartphones and tablets.
Global spending on semiconductors is expected to rise 6.7
percent this year to $336 billion, according to market
researcher Gartner. STMicro's U.S. rival Texas Instruments
has also predicted higher third-quarter sales on
STMicro shares were down 3.9 percent at 6.69 euros at 0954
GMT, underperforming the European technology index which
was up 0.5 percent.
"Despite a strong environment, STM struggles to deliver a
good quarter and guides below expectations," said Pierre
Ferragu, an analyst at Bernstein Research.
"The same old story seem to apply again: when the company
gets positioned to turn around a division, another one gets into
competitive troubles," said Ferragu.
He was referring to how stronger sales of chips for set-top
boxes expected in the coming quarters contrasted with weaker
ones seen for motion-sensor chips that power some high-end
smartphones and videogame consoles.
Societe Generale analysts said in a note: "Management's goal
of 3 percent seems relatively modest to us given the strength in
automotive and industrial products."
RETURN TO PROFIT
STMicro, whose competitors also include Infineon
and NXP Semiconductors, has struggled to keep up with
rivals in recent years because of its higher cost base and
difficulties suffered by mobile phone maker Nokia, once its
In an attempt to make up lost ground, it has trimmed its
product line, and particularly focused on cars, high-end
smartphones and motion sensors, as well as exiting an
unprofitable mobile-chip joint venture last year.
STMicroelectronics posted net revenue of $1.86 billion and a
gross margin of 34 percent in the second quarter. Analysts had
on average expected second-quarter sales of $1.89 billion,
according to Thomson Reuters I/B/E/S.
It returned to profit for the first time since the third
quarter of 2011 - posting net profit of $38 million, boosted by
public funds for nanotechnology research in a programme called
STMicroelectronics shares had risen 19 percent this year
ahead of the quarterly results because some investors have been
betting on the stock being undervalued as the group recovers
from the tough exit from the mobile chip venture.
It has outperformed the European technology index, which is
down 0.4 percent over the same period.
Andrea Tuéni, sales trader at Saxo Bank, said the return to
profitability was encouraging. "There is some profit-taking
going on today ... since the market was expecting good results
from STM," said Tuéni.
(Additional reporting by Alexandre Boksenbaum-Granier; Editing
by James Regan and Pravin Char)