STMicro reports Q2 loss, warns on Q3

Europe's biggest semiconductor maker STMicroelectronics NV (ST) blamed order cancellations for disappointing second-quarter revenue, down to US$1.59 billion compared to $1.88 billion a year ago, and warned that lower earnings would continue into the third quarter.

That figure is in line with the lowered revenue expectations of between $1.55 billion and $1.6 billion for the quarter ending June 30 that ST announced last month, but well down on the $1.65 billion to $1.8 billion range that the company had previously anticipated. The order cancellations mainly affected ST's telecommunication and computer peripheral businesses. The company said it will take a charge for excess inventory of $70.7 million in the second quarter as a result.

The market still has further to fall, but will begin to recover at the end of this year, the company said in a statement. The industry will bottom out in the third quarter of 2001, it said, and revenue will decline by between 10 percent to 15 percent from the previous year, but the company expects to see signs of a recovery in the fourth quarter, according to the statement.

During the quarter, Europe accounted for 35.9 percent of ST's revenue, Asia/Pacific for 33.4 percent, North America for 18.3 percent and Japan 7 percent, ST said.

Revenues declined fastest in North America, where they dropped 35.3 percent compared to the same quarter last year, while the market in Japan grew 3.2 percent, the company said.

ST has instituted a hiring freeze and said that since the beginning of the year, employee headcount has been reduced by about 1,500 people due to attrition.

In May, ST announced plans to close its wafer fabrication plant in Ottawa and transfer most of the employees there to other facilities. The Ottawa plant was formerly the in-house silicon semiconductor production operation for Nortel Networks Corp. ST also said at the time that it would limit its capital investments to $1.5 billion this fiscal year, down from a planned $1.9 billion. ST supplies chips to large players in various parts of the technology industry worldwide with customers including Nokia Corp, LG Electronics Inc., and Hewlett-Packard Co.