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STMicroelectronics is expecting an 8% fall in sales in Q4 from Q3 with weakness in most areas except wireless. However the last three weeks have seen an upturn in bookings.
“We have two problems,” says ST CEO Carlo Bozotti, “one problem is the market of course; the other problem is called Nokia.”
ST expects Q4 gross margin of 33.5% compared with 35.8% in Q3 due to under-loading of fabs.
“We have initiated programmes to significantly reduce activities at our fabs using the highest flexibility provided by the local levels in each jurisdiction we operate during the fourth quarter to align with where we believe the market will be,” says Bozotti.
Q3 fab utilisation was 83% and Q4 utilisation is expected to drop to between 70-75%.
Q4 capex will be “very significantly reduced” compared to the $384m spent in Q3 which will result, says Bozotti, in “a very substantial improvement in our free cash flow during the fourth quarter.”
Bozotti pointed out that operating income of $775m from ST’s wholly-owned businesses in the first nine months of 2011 is up 28% year-to-date.
A particular bright spot is ST’s MEMS business which is expected to double its revenues this year on last.
On the loss-making joint venture business, ST-Ericsson, Bozotti says: “In the event of a significant worsening of the current market conditions or a lack of result we will consider additional actions to improve performance.” He ruled out selling the stake.
ST does not see a repeat of 2008. “During the crisis at the end of 2008 many of our top customers physically closed the doors, they stopped buying anything and this is not the case today,” says ST CFO Carlo Ferro, adding that the same pattern is not happening today.