Analog chipmaker STMicroelectronics ( STM) said after the close Wednesday that first-quarter sales rose 25.4% from last year's levels. Net revenue for the period stood at $2.029 billion, compared with analyst expectations for $2.052 billion. Gross margin checked in 35.4%, up slightly from 35.0% last year. Net income reached $77 million, down from $79 million in the same quarter last year, equivalent to 8 cents a share after including a one-time pretax charge of $8 million for bond repurchases and $33 million in restructuring charges and related closure costs. Without those charges, earnings would have stood at 11.5 cents to 12 cents, in line with consensus estimates, said Legg Mason analyst Cody Acree, who has a buy rating on the stock. He said ST's strong sequential guidance shows it's seeing broad-based strength in markets beyond just wireless, where troubles at handset maker Nokia, a major customer of ST, could have weighed on the chipmaker. He has a buy rating on ST; his firm hasn't done banking for it. After the bell, the stock gained 38 cents, or 1.7%, to $22.75. The shares closed up 6 cents, or 0.3%, to $22.37 in regular trading Wednesday. Year to date, though, STMicroelectronics' stock is down 17%. In the first quarter, STM drew one-third of its sales from the telecom segment, with 20% from the consumer products sector, 17% from computers, 16% from industrial and 14% from autos. In guidance for the second quarter, the company forecast revenue growth of 6% to 12% from the first quarter, or year-on-year growth of 26% to 33%, driven by growth in the auto, consumer and industrial markets. STM didn't issue earnings guidance. For the June quarter, Wall Street had forecast earnings of 16 cents on sales of $2147.2 billion. Second-quarter gross margin should rise to about 37%. In another announcement today, STM signaled bullishness by pledging to increase its capital spending. "All indications are that order rates for STM products will continue strong throughout 2004," CEO Pasquale Pistorio said in a prepared statement. "In response to current industry dynamics, and reflecting our longer term view of STM's market positioning, we have decided to increase 2004 capital expenditures to approximately $2.2 billion, from the $1.6 billion that we initially budgeted. Approximately two-thirds of this amount will be allocated to leading-edge technologies and R&D programs."
Pistorio said management expects 2004 to be "a year of progressive growth in revenues and profitability for STM, and we believe that the prospects for 2005 are solid. Therefore, we are allocating our resources in order to maximize our competitive position while making investments in technology, product development, and customer service and support to ensure STM's continued leadership in our targeted market segments." In March, the company named a new chief executive officer, pending shareholder approval: Carlo Bozotti, who has headed the company's memory group since 1998. Current CEO Pasquale Pistorio has announced plans to retire in 2005.