STMicroelectronics At Citi Technology Conference (Transcript)

STMicroelectronics (STM)

Citi Technology Conference

September 04, 2012 01:30 PM ET

Executives

Philippe Lambinet - Chief Corporate Strategy Officer and General Manager

Analysts

Amit Harchandani - Citi

Presentation

Question-and-Answer Session

Amit Harchandani - Citi

Okay I guess we will get started, first of all thanks to all of you for joining us today. I am Amit Harchandani, I head the European Technology coverage for Citi based out of London and I am also the covering analyst for STM. I am delighted to have STM join us again this year and from STM today we have Philippe Lambinet and Tait Sorensen, Tait is Director of IR and Philippe I guess, those of you who are new to the STM is the firm's Chief Corporate Strategy Officer and the General Manager of the Digital Sector. In fact he is a chip veteran having spent probably 30 years, best part of 30 years of his life looking at chips of all shapes and sizes. So, without further delay I think Philippe said let’s quickly jump into Q&A straight-off so that’s what we are going to do. So, as a start maybe just to get the discussion going Philippe if you could just tell us what are you seeing in the market today. I mean STM is probably the best candidate given your diversified positioning to talk about the broader market trend, how would you characterize current demand versus the first half and is it better, worse, same, is it the same across different product segment?

Philippe Lambinet

When we published our results that the end of July for Q2, we already communicated that the following trend which we saw starting mid-last year an inventory correction and we saw the end of that inventory correction in Q1 this year and the only part of Q2 was actually quite positive. We had a good rebound, April and May bookings were quite good, so we were quite optimistic for the rest of the year. Now when we again when we published our result in July we said let’s not be too bullish, the June bookings and the July bookings have not been very good. The market is softening. What I can say is that softening is continuing. The August bookings have continued to be not very strong. So, it's too early to say whether it will rebound now and in Q4 or whether it's going to be a double dip and it will further weaken. Right now it's flattish so we had taken a flattish booking situation into account in our guidance for Q3 so we have no reason to change our guidance but it's a bit early to say how we will guide for Q4 and of course we will have another month and half before we have to do this but definitely the weakness is there, continues to be there. It's across all applications and it's across all regions, so there isn’t particularly dark spot and there isn’t a particularly bright spot I think all of the market is pretty weak.

The inventory correction is over, I mean the inventory is top inventory in the channel has stopped decreasing. It's at a fairly low level but it's not coming back so people are not bullish enough or confident enough to start restocking. So I think the message is pretty simple we told already the market that June and July were weak. I think we can confirm it's continuing to be flattish and not particularly recovering.

Amit Harchandani - Citi

So you said that it's pretty much the same situation across the different product segments, so no real bright spots per se or would you still say that there are some who are doing slightly better than the others?

Philippe Lambinet

My comment was on the market, not on ST. Of course when it comes ST, ST performance in those markets is different from one unit to the next. We have some units that perform well even that weak market they are growing because they are performing better than the market. I mean we can reiterate what we said in July it's still true. In Q3, we will have the MEMs business grow, we will have MCU business grow, we have IGBT, IGBT modules, Power MOS growing which means gaining market share basically and we have particularly one business that is suffering in Q3 versus Q2 which is the optical sensor, the imaging business which is particularly suffering from two customers who have market share issues in the smartphone segment. So those two customers been weak and our imaging business been very much linked to those two customers. We are suffering in the second half of this year for sure.

After a good 2011 and a decent first half, definitely the second half is not as good. So this was anticipated and already communicated in July and we can’t confirm this right now.

Amit Harchandani - Citi

I think since we are on the topic of near term, I mean a slightly cheeky question if I may. It would be interesting to hear your thoughts on that topic which has dominated headlines recently which is the ongoing litigation between Apple and Samsung. I admit both are your customers and you respect the relationship but in the broader sense particularly when you include the ST-Ericsson perspective, would you say threat for the Android eco-system is an overall negative for your firm?

Philippe Lambinet

Well we don’t like to comment on ongoing litigations and it's difficult to see how this will come out. I think ST has enjoys very good presence in both eco-system and you know ST will benefit from the growth of the overall market. As people know we have MEMs for example in both side in the iOS eco-system and in Android eco-system. We are not particularly anxious on one side or the other no matter how it will go.

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