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ST-Ericsson reports Q4 209 results with 2% increase in net sales

Geneva, Switzerland, 22 January, 2010

• Net sales $740 million; 2% sequential increase
• Adjusted operating loss[1] $50 million
• Restructuring plans on track, additional $115 million savings announced in December

ST-Ericsson, a joint venture of STMicroelectronics (NYSE:STM) and Ericsson (NASDAQ:ERIC), reports financial results for the fourth quarter 2009.

President and CEO, Gilles Delfassy, commented: "In the fourth quarter, we gained further momentum in one of the fastest growing markets, China, where we are the clear leader in its standard TD-SCDMA, having delivered more than 6.5 million chipsets by the end of December 2009. In addition, we have taken further actions to improve our financial performance and increase our competitiveness.

2009 has been a challenging year for our industry. For ST-Ericsson, the challenge was especially great. We had to strive to maintain our positioning, while also setting the foundations for sustainable and profitable growth. We will achieve this by rapidly integrating the businesses we have merged and by transitioning to the new portfolio strategy we devised for our next generation offering. During its first year, the company has made good progress in all areas, but more still needs to be done.

Our industry is evolving to embrace a wider multimedia ecosystem; the mobile platform has now become the convergence point for most consumer electronics, changing consumers' lives and opening up new opportunities even outside the traditional handset market. We are well positioned to remain a leading player, thanks to the combination of our advanced modem expertise and multimedia processing capabilities. We will build on these strengths to prepare the company for future, profitable growth."

2009 by quarter (unaudited)[3]

Net sales reported a 2% sequential increase driven by continued demand in China.

The operating loss of $50 million, excluding amortization of acquisition-related intangibles and restructuring charges, compares to a $77 million operating loss reported in the third quarter 2009 and it reflects reduced operating expenses.

Inventory management continued to produce positive results thanks to improved efficiency in the supply chain. Inventory declined by $33 million, reaching a level of $244 million at the end of the quarter.

Net cash[2] was $229 million at the end of fourth quarter 2009, a sequential increase of $13 million, including improved working capital and a one-time payment of $53 million from parent companies related to final merger transaction adjustments already planned since the inception of the company.

Update on restructuring plans

The $250 million cost synergies program defined by ST-NXP Wireless is now fully completed.

The $230 million savings restructuring plan, announced on April 29 2009 and due to be completed by the second quarter of 2010, is currently in progress and its effects in the fourth quarter 2009 have been in line with plans.

On December 3 2009, ST-Ericsson announced its proposed plan to further improve financial performance and increase competitiveness in the market.

This plan is targeting additional annualized savings of $115 million that are expected to come from reductions in operating expenses and spending, along with an extensive R&D efficiency program. As part of this effort, the company is also conducting a global workforce review which may affect up to an additional 600 employees worldwide. The targeted time of completion of this plan is end of 2010.

The company estimates that the remaining costs associated with the ongoing restructuring plans will be incurred within 2010.

Market evolution

While medium term visibility is somewhat limited, first quarter 2010 is expected to be characterized by the usual market seasonal decline.

Q4 2009 highlights - products, technology and wins

LG Electronics selected ST-Ericsson's mobile HSPA broadband modem, M340 to power the LG GW990 mobile internet device which will be launched in the second half of 2010. The M340 is part of the mobile platforms solution, together with the Intel Moorestown solution. The M340 is a small, flexible modem solution with low power consumption enabling high speed internet access.

Nokia and ST-Ericsson announced a long-term partnership in the area of TD-SCDMA technology and solutions. The partnership will see Nokia using ST-Ericsson as a key supplier of chipset platforms in its Symbian based TD-SCDMA devices and solutions portfolio.

ST-Ericsson, together with Ericsson, announced the companies successfully achieved first mobility between LTE and HSPA networks, using a multimode LTE/HSPA device powered by ST-Ericsson's M710 platform.

In October, the company announced cooperation with ARM to accelerate innovation in mobile user experience. ST-Ericsson's U8500 is the first smartphone platform to integrate a Mali-400TM graphics processing unit providing access to a leading-edge environment for graphics developers.

Pro-forma information: 2009 vs. 2008 (unaudited)[3]

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