STMicroelectronics Reports 2008 Fourth Quarter and Full Year Revenues and Earnings
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STMicroelectronics Reports 2008 Fourth Quarter and Full Year Revenues and Earnings

GENEVA, Jan. 27 /PRNewswire/ -- - Fourth quarter net revenues $2.28 billion

- Fourth quarter net operating cash flow of $153 million*

- Full year net revenues $9.84 billion; full year clean EPS* of $0.40

GENEVA, Jan. 27 /PRNewswire-FirstCall/ -- STMicroelectronics (NYSE: STM) reported financial results for the 2008 fourth quarter and full year ended December 31, 2008.

ST completed the deconsolidation of its Flash Memory Group (FMG) segment and took an equity interest in Numonyx on March 30, 2008, with an anticipated one quarter lag in reporting.

ST-NXP Wireless, a joint venture owned 80% by ST, began operations on August 2, 2008 and is fully consolidated into ST's operating results. The fourth and third quarter 2008 financial review includes the ST-NXP Wireless joint venture except where noted.

Fourth Quarter 2008 Financial Review

    Summary Financial Highlights

    In Million US$ and %           Q4 2008        Q3 2008        Q4 2007
    --------------------           -------        -------        -------

    Reported Net Revenues           2,276          2,696          2,742

    Gross Margin(a)                  37.5%          37.7%          36.9%

    Reported Net Earnings            (366)          (289)            20

    Effective Exchange Rate
     $/euro(b)                       1.40           1.54           1.43

    (a) Fourth quarter 2008 and third quarter 2008 exclude a $31 million and
        $57 million charge, respectively, due to inventory step-up purchase
        accounting adjustments related to the former NXP Wireless business.
    (b) The Company's effective exchange rate reflects actual exchange rate
        levels combined with the impact of hedging programs.

(*) Non-US GAAP metric. Please see page 4 for additional information.

Reflecting the sharp downturn in the global economy during the fourth quarter, ST's 2008 fourth quarter net revenues decreased 15.6% sequentially and 17.0% year-over-year, driven by significant weakness across most geographies and market segments, in particular Automotive, Telecom and Computer.

Reported gross margin in the fourth quarter of 2008 was 36.1%. Excluding an acquisition-related inventory step-up charge to Cost of Goods Sold of $31 million in the fourth quarter of 2008 and $57 million in the third quarter of 2008, respectively, gross margin in the fourth quarter was 37.5%, a slight decrease from 37.7% in the prior quarter. The profitable contribution from a favorable currency impact and an improved product mix were offset by the negative impact of substantially lower sales and higher-than-anticipated unused capacity charges. In the fourth quarter of 2007, gross margin was 36.9%. The Company estimates that the underutilization of our fabs negatively impacted the fourth quarter 2008 gross margin by over 200 basis points.

President and CEO Carlo Bozotti commented, "Fourth quarter net revenues came in at the mid-point of our updated outlook and reflected the accelerated level of order push-outs and cancellations and decrease in demand as the quarter progressed. All product areas were negatively affected, in particular automotive, wireless and computer peripherals. Gross margin was somewhat lower than the mid-point of our revised outlook mostly due to our final product mix being below our expectations, in particular in wireless.

"For the full year 2008, ST made significant progress as the Company gained market share with a stronger product portfolio. ST will continue this momentum in 2009 as we focus on developing more innovative products. Looking at our position in the semiconductor market, we grew our revenues faster than the overall market during 2008 and estimate we are approaching a record level of market share.

"The Company also generated net operating cash flow of $153 million for the fourth quarter and $647 million for the full year excluding M&A transactions. As a result, despite a tougher fourth quarter environment, ST completed 2008 with a solid financial position. In 2009, we will continue to focus on cash flow as well as maintaining a strong and flexible capital structure."

Operating Expenses

In the 2008 fourth quarter, combined SG&A and R&D expenses of $876 million included a full quarter of expenses and $25 million in recurring amortization charges related to the former NXP Wireless business, which were partially offset by $41 million in favorable sequential currency effects. Operating expenses in the third quarter 2008 included $12 million of amortization related to the NXP Wireless purchase accounting.

Fourth quarter 2008 SG&A expenses totaled $304 million, compared to $297 million in the prior quarter, and $295 million in the year-ago quarter. R&D expenses in the fourth quarter 2008 totaled $572 million, compared to $602 million (including the one-time, non-cash $76 million charge for in-process R&D) in the prior quarter, and $480 million in the year-ago quarter.

Operating Results, Earnings and Earnings per share

For the 2008 fourth quarter, the Company reported an operating loss of $139 million and a net loss of $366 million, or -$0.42 per share compared to the year-ago quarter operating loss of $15 million and net income of $20 million, or $0.02 per diluted share. Excluding charges relating to restructuring and impairment, inventory step-up, and other-than-temporary impairments on the Numonyx equity investment and certain financial assets, the fourth quarter 2008 net loss was $57 million, or -$0.06 per share compared to the year-ago quarter net income of $255 million or $0.27 per diluted share on a comparable basis.

Fourth quarter 2008 restructuring and impairment charges totaled $91 million and largely related to previously committed restructuring programs.

In the fourth quarter 2008, the loss on equity investments registered a non-cash charge of $204 million including $180 million of impairment on the Numonyx equity investment to reflect further deteriorated conditions in both the equity market multiples for comparable companies and the memory industry as well as ST's $16 million share of Equity loss on Numonyx's Q3 2008 results. Importantly, Numonyx as of December 31, 2008 held about $500 million in cash on its balance sheet, representing an amount similar to the balance at inception.

Following the prior announcements of impairment recognition in certain asset-backed securities, in the 2008 fourth quarter a new accounting valuation resulted in $55 million of pre-tax other-than-temporary impairment charges of certain financial assets. The Company is pursuing various claims against Credit Suisse Securities (USA) LLC and Credit Suisse Group relating to unauthorized purchases of auction rate securities backed by collaterized debt obligations and credit linked notes.

Cash Flow and Balance Sheet Highlights

Net cash from operating activities is estimated at $388 million in the 2008 fourth quarter, somewhat lower than the $414 million in the third quarter 2008. Net operating cash flow* is estimated at $153 million for the fourth quarter 2008 compared to $140 million in the third quarter of 2008, excluding $1.52 billion paid for M&A transactions, and $188 million in the year-ago quarter. For the full year 2008, net cash from operating activities is estimated at $1.72 billion compared to $2.19 billion for the full year 2007 and net operating cash flow is estimated at $647 million in 2008, excluding $1.69 billion paid for M&A transactions, compared to $840 million in 2007.

Fourth quarter of 2008 cash flow data are estimated following a delayed calendar for the final closing of the cash flow statement due to the purchase accounting of business combinations.

Capital expenditures were $204 million during the fourth quarter of 2008, compared to $247 million in the prior quarter and $405 million in the year-ago quarter. For the full year, capital expenditures were $981 million, or 10.0% of net sales, compared to $1.14 billion or 11.4% of net sales in 2007.

In the 2008 fourth quarter, ST completed its authorized share repurchase plan and repurchased $82 million of common stock, as well as paid $79 million in dividends. For the first quarter 2009 the global ex-dividend date will be February 23, 2009 and the dividend of $0.09 is planned to be paid on or after this date, in accordance with the schedule previously announced on April 2, 2008.

Inventory was $1.84 billion at quarter end and reflected increased levels due to the sharp decrease in sales volumes in the fourth quarter 2008 and differences in the anticipated mix of products sold.

At December 31, 2008, ST's cash and cash equivalents, marketable securities (current and non-current), short-term deposits and restricted cash equaled $2.15 billion. Total debt was $2.70 billion. ST's net financial position* was a net debt of $0.55 billion. Shareholders' equity was $8.16 billion.

*Non-US GAAP metrics used above and below are defined as:

Net operating cash flow is utilized by the Company's management as a measure of cash-generation capability. It is defined as net cash from operating activities ($388 million in the fourth quarter of 2008) minus net cash used in investing activities (-$171 million in the fourth quarter of 2008) excluding payments for purchase of and proceeds from the sale of marketable securities ($64 million in the fourth quarter of 2008) and the proceeds from matured short-term deposits and restricted cash.

Clean earnings per share is used by the Company's management to help enhance an understanding of ongoing operations and to communicate the impact of the excluded items. Clean earnings in full year 2008 ($356 million or $0.40 per share) excludes restructuring and impairment charges ($481 million), the impact of purchase accounting (such as in-process R&D costs ($97 million) and inventory step-up charges ($88 million)), other-than-temporary impairment charges on financial assets ($138 million) and impairment related to equity investments ($480 million), net of the relevant tax impact ($141 million).

Net financial position is used by the Company's management to help assess financial flexibility. It is defined as cash and cash equivalents, marketable securities (current and non-current), short-term deposits and restricted cash ($2,152 million) minus total debt (current portion of long-term debt $143 million plus long-term debt $2,554 million).

Net Revenues by Market Segment for Q4 2008

The following table estimates, within a variance of 5% to 10% in the absolute dollar amount, the relative weighting of each of the Company's target market segments for the 2008 fourth quarter.

    As % of Net Revenues                         Q4 2008

    Market Segment

    Automotive                                     12.6%
    Consumer                                       17.0%
    Computer                                       15.5%
    Telecom                                        38.2%
    Industrial & Other                             16.7%

Both sequentially and year-over-year, all market segments posted declines reflecting the global economic slowdown. On a sequential basis, Automotive was lower by 21% and Telecom by 20%, followed by Computer which decreased 14%, Industrial by 10% and Consumer by 8%. In comparison to the year-ago quarter, Automotive declined 27%, followed by Computer which decreased by 20%, Telecom by 17%, Consumer by 12% and Industrial by 8%.

Q4 2008 Financial and Operating Data by Product Segment

The following table provides a breakdown of revenues and operating income by product segment.

    In Million US$ and %                 Q4 2008
    Product Segment                      -----------------------------------
                                           Net      % of Net      Operating
                                         Revenues   Revenues    income (loss)

    ACCI (Auto/Cons./Comp./Telecom
     Infra. Product Groups)                 899       39.5%          (3)
    IMS (Industrial and Multisegment
     Product Sector)                        791       34.8%          85
    WPS (Wireless Product Sector)           575       25.2%         (82)
    Others (a) (b)                           11        0.5%        (139)

    TOTAL                                 2,276        100%        (139)

    (a) Net revenues of "Others" include revenues from sales of Subsystems and
        other revenues.
    (b) Operating income (loss) of "Others" includes items such as impairment,
        restructuring charges, and other related closure costs, start-up
        costs, and other unallocated expenses such as: strategic or special
        research and development programs, acquired in-process R&D and other
        purchase accounting impacts, certain corporate-level operating
        expenses, patent claims and litigations, and the other costs that are
        not allocated to product groups, as well as operating earnings or
        losses of the Subsystems and Other Products Group. The fourth quarter
        2008 "Others" include a $31 million charge due to purchase accounting
        items and $91 million of impairment and restructuring charges.

ACCI (Automotive/Consumer/Computer/Telecom Infrastructure Product Groups):

    --  ACCI's net revenues declined 17.2% sequentially and 16.6%
        year-over-year, reflecting a significant decrease in Automotive as well
        as difficult market conditions in all other areas but mitigated by
        sequential and year-over-year mix improvements in Consumer.
    --  ACCI's operating result registered a slight loss of $3 million, a
        substantial decrease both sequentially and year-over-year, largely due
        to lower sales volumes in the fourth quarter.

IMS (Industrial and Multisegment Product Sector):

    --  IMS net revenues decreased 12.2% sequentially and 6.5% year-over-year,
        reflecting a general decline in multisegment market conditions except in
        MEMS, Smartcards and Microcontrollers.
    --  Fourth quarter IMS sales were composed of $513 million of ICs which
        declined 11% sequentially but increased 1% year-over-year and $278
        million of discrete products which decreased 15% sequentially and 18%
    --  IMS operating profit was $85 million, a significant decrease both
        sequentially and year-over-year.

WPS (Wireless Product Sector):

    --  WPS net revenues decreased 17.4% sequentially reflecting significant
        weakness in the wireless market. On a year-over year-basis, WPS net
        revenues increased 29.6% reflecting additional sales from the joint
        venture with NXP Wireless as well as an improved product mix and
        expanded customer base.
    --  WPS' fourth quarter 2008 operating loss of $82 million includes $25
        million of amortization of intangibles from the NXP Wireless acquisition
        and was largely due to a sharp drop in sales volumes and higher R&D

Full Year 2008 Results

The following income statement for the full year 2008 incorporates the former NXP Wireless business since August 2, 2008 and FMG for the first three months of 2008 and the full year 2007.

    Net Revenues            Full Year 2008  Full Year 2007   Year-over-Year
    (In Million US$ and %)                                   Change

    ST as reported                9,842          10,001           (1.6%)

    ST ex FMG and
     NXP Wireless                 9,052           8,637            4.8%

Net revenues for the full year were $9.84 billion compared to 2007 revenues of $10.0 billion, as reported. Excluding FMG and NXP Wireless, net revenues grew 4.8% in the similar period.

Mr. Bozotti commented, "2008 was a critically important year in advancing the repositioning of our product portfolio, with the focus of our resources and investments in power applications and multimedia convergence with wireless and digital consumer."

Gross margin, as reported, but excluding the inventory step-up from the addition of NXP Wireless increased to 37.1% of net revenues, compared to 35.4% of net revenues for 2007. Year-over-year gross margin reflects an estimated 100 basis-point negative currency impact.

Research and development expenses were $2,152 million, including $97 million of in-process R&D charges, associated with the acquisition of Genesis Microchip and the addition of NXP Wireless, compared to $1,802 million in 2007. Selling, general, and administrative expenses were $1,187 million compared to $1,099 million in 2007, increasing primarily due to adverse currency effects.

Operating loss, as reported, was $198 million in 2008, compared to the operating loss of $545 million in 2007. Net loss, as reported, was $786 million in 2008, or $-0.88 per share, compared to a net loss of $477 million, or $-0.53 per share in 2007. Net loss included pre-tax restructuring and impairment charges ($481 million), in-process R&D costs ($97 million), inventory step-up charges from NXP Wireless purchase accounting ($88 million), other-than-temporary impairment charge on financial assets ($138 million) and the impairment related to the Numonyx equity investment ($480 million) of $1,284 million with a tax impact of $141 million ($1.28 impact to earnings per diluted share in total) and $1,295 million ($1.29 impact to earnings per diluted share impact in total) for 2008 and 2007, respectively.

The Company estimates full year 2008 clean earnings excluding restructuring and impairment charges, the impact of purchase accounting, other-than-temporary impairment charges on financial assets and the impairment related to equity investments, net of the relevant tax impact to be $356 million or $0.40 per share.

In 2008, the US dollar weakened by approximately 10% as the effective average exchange rate for the Company was approximately $1.49 to euro 1.00 for 2008, compared to $1.35 to euro 1.00 for 2007.

While the US dollar strengthened during the 2008 fourth quarter, for the full year 2008 it had a significant negative impact on the Company's profitability. The Company estimates that on a constant currency basis its 2008 operating profit, excluding restructuring and impairment charges and one-time adjustments, would have been about $310 million higher (315 basis points) than the proforma figure of $468 million and about $74 million higher than the 2007 comparable figure of $704 million.

Full Year 2008 Financial and Operating Data by Product Segment

The following table provides a breakdown of revenues and operating income by product segment.

    In Million US$ and %                Full Year 2008
                                          Net       % of Net    Operating
    Product Segment                     Revenues    Revenues   income (loss)

    ACCI (Auto/Cons./Comp./Telecom
     Infra. Product Groups)               4,129       42.0%         107
    IMS (Industrial and Multisegment
     Product Sector)                      3,329       33.8%         459
    WPS (Wireless Product Sector)         2,030       20.6%         (70)
    FMG (Flash Memories Group) (a)          299        3.0%          16
    Others                                   55        0.6%        (710)

    TOTAL                                 9,842        100%        (198)

    (a) Operating income for FMG in the period reflects the benefit of
        suspended depreciation for Assets Held For Sale.

Full Year 2008 Revenues by Product Group

The following table provides a breakdown of revenues by product group.

    Net Revenues                    Full Year  Full Year  Year-over-Year
    (In Million US$ and %)             2008       2007        Change

       Automotive (APG)                1,460     1,419          2.9%
       Computer and Communication
        Infrastructure (CCI)           1,077     1,123         (4.0%)
       Home Entertainment &
        Displays (HED)                 1,585     1,402         13.0%
       Other ACCI                      7         0             n/a

       Analog, Power and MEMS (APM)    2,393     2,313          3.5%
       Micro, non-Flash Memory
        and Smartcard (MMS)              936       825         13.3%

Business Outlook

Mr. Bozotti stated, "While it is extremely difficult to predict how the industry will evolve in 2009, we believe it could be a year of fundamental change and opportunity.

"We have four key priorities for ST during 2009.

    --  First, 2009 will be a year focused on improving our competitiveness as
        we execute on our plan to complete the wireless joint venture with
        Ericsson Mobile Platforms during the first quarter.
    --  Second, we are targeting to reduce our costs by over $700 million in
        2009 in respect to the Company's fourth quarter 2008 cost base. The
        actions are a combination of the ongoing restructuring initiatives and
        new programs that are focused on resizing the Company's manufacturing
        operations and streamlining expenses, and are expected to affect about
        4,500 net jobs worldwide in 2009.
    --  Third, we continue to advance our lighter asset strategy focused on
        careful management of our capital investments. As a result, we have set
        a capex budget of about $500 million for 2009, representing a 50%
        reduction in comparison to 2008.
    --  Fourth, thanks to our strong and consistent investment in our product
        portfolio we are in a solid position to provide innovative products that
        will continue our momentum by driving the Company to gain market share
        in 2009 just as we have in 2008."

Current uncertainty in the global financial markets, economic recession in one or more of the world's major economies, seasonality, and the effect on demand for semiconductor products in the key application markets and from key customers served by our products makes it extremely difficult to accurately forecast product demand and other related matters and makes it more likely that ST's actual results could differ materially from expectations. Consequently, the Company will only provide approximate revenue and gross margin internal planning targets with respect to the first quarter of 2009. When visibility on market conditions improve, the Company will reconsider providing quantitative guidance similar to past practices. In the meantime and for internal purposes, the Company is currently planning for revenues to be in the range of $1.5 billion to $1.85 billion. As ST works to reduce inventory levels during this timeframe, fab loading will run at levels of about 50%, driving gross margin to a extraordinary low level which the Company is planning for internal purposes to be in the mid to high 20s as a percentage of sales. Gross margin is subject to changes in demand levels and pricing that could impact fab loading, inventory write-offs, mix and unit costs, and combined with currency fluctuations potentially create additional margin variability.

The above internal planning data do not include the potential impact - to include related purchase accounting - of the expected business combination with Ericsson Mobile Platforms.

Q4 2008 Products, Technology and Design Wins

Automotive, Consumer, Computer and Telecom Infrastructure (ACCI) Product Highlights

    --  In automotive powertrain applications, ST gained several design wins: a
        multi-driver IC for a market leader in Japan, expected to be used by two
        car makers in Japan and third in China; and in Europe, tier-one OEMs
        selected ST for a mid- to low-end powertrain platform, including
        multiple Power PC-based microprocessors, and as the single-source
        supplier for gasoline direct-injection integrated driver ICs, for use in
        small to medium Euro 5 and 6 cars from 2012, involving most European car
        makers and several makers in China. ST also gained design wins for its
        automotive standard products, in areas such as airbags and brake-control

    --  Also in powertrain, ST and LG Chem unveiled details of a battery pack
        combining LG Chem's lithium-ion battery technology and a
        state-of-the-art battery-management IC from ST, which can significantly
        extend the potential of electric and hybrid electric vehicles (HEVs),
        reducing both petrol consumption and CO2 emissions. In safety
        applications, ST announced its first high-dynamic-range CMOS camera
        tailored for vision-based Advanced Driver-Assistance Systems (ADAS).

    --  In car multimedia, ST announced it is to collaborate on a common
        platform that combines ST's GPS technology with NAVTEQ's digital road
        map, also for ADAS solutions. ST's GPS technologies were also selected
        by two major system makers for telematics applications in South America
        and also for tolling systems in Europe. Additionally, ST introduced the
        world's first car audio-amplifier with a digital input, eliminating the
        need for signal conversion and resulting in higher sound quality and
        better noise immunity.

    --  In car-body applications, ST gained many design wins for body control
        module platforms in Europe and Japan and achieved strong market
        acceptance of its 24V product roadmap for intelligent power switches. ST
        also introduced a single chip that produces the major signals required
        to drive vehicle door-mounted systems as well as an improved method for
        controlling electrochrome rear-view mirrors, eliminating discrete driver
        chips normally mounted in multiple locations inside the door.

    --  In digital consumer, ST announced its leading-edge STi7141 cable TV
        set-top-box IC combining high-definition and interactive capabilities
        and the STDP3100 DisplayPort-to-VGA converter enabling seamless
        connectivity between legacy VGA monitors, projectors and the new
        generation of DisplayPort PCs and notebooks. ST's DisplayPort products
        were adopted by two leading LCD and plasma TV makers for their 'two-box'
        TV systems, to deliver performance up to120Hz full high definition.

    --  In consumer audio, ST gained two design wins in Korea for home
        entertainment systems for the latest device in its Sound Terminal
        family. The chip integrates standard digital processing features and an
        expansion of analog-input capabilities to enable higher flexibility in
        audio source management.

    --  In computer peripherals, ST secured major design wins for
        hard-disk-drive (HDD) ICs for desktop PC applications, including: a HDD
        motor controller from a leading maker; a 40nm process technology
        system-on-chip (SoC), also from a leading HDD maker; and sampling of a
        new desktop HDD power combo to major customers, based on ST's
        latest-generation BCD (Bipolar-CMOS-DMOS) technology. ST also gained a
        design win for an ASIC, implemented in 40nm technology, from a major OEM
        for the printer and imaging market.

    --  In communications infrastructure applications, ST gained an important
        design win from a leading OEM for the development of an ASIC for use in
        data-center solutions.

Industrial and Multi-Segment (IMS) Product Highlights

    --  In MEMS motion sensors, ST introduced a family of 3x3x1mm
        high-performance three-axis linear accelerometers with digital output,
        boasting resolution scalability, smart embedded features and reduced
        power consumption. ST also gained a two key design wins for its
        three-axis devices for a portable navigation device and also a tablet
        PC. Additionally, the Company was recently named by iSuppli as the
        leading supplier in 2008 of MEMS for consumer and portable applications.

    --  Also in MEMS, ST introduced its first automotive-qualified three-axis
        MEMS accelerometer, fully leveraging its strategy to bring economies of
        scale from its market-leading business in consumer to new automotive and
        industrial applications.

    --  In microcontrollers, ST further extended options of its breakthrough
        32-bit STM32 ARM Cortex-M3 based MCUs with devices offering 16-Kbyte
        Flash densities as well as a complete series integrating full-speed USB
        peripherals. ST also introduced a DSP library for the STM32, allowing
        developers to take full advantage of the MCU to host signal processing
        and control functions on the same core. Also in Q4, the STM32 was
        acclaimed with the winning of 2008 Best Product Award from EDN China.

    --  In smartcards, ST introduced a number of products, including two
        advanced 32-bit families, the ST32 and ST33, which are based on the ARM
        Cortex M3 and its highly secure SC300 version for mobile-phone SIM
        cards. These new products offer features that will allow mobile network
        operators to enhance differentiation and expand revenue growth by
        delivering richer services to subscribers. ST also introduced a
        smartcard IC for secure identity cards supporting the latest
        cryptography techniques, contact and contactless interfaces and a large
        memory for biometric data. The device meets International Civil Aviation
        Organization requirements for Machine Readable Travel Documents.

    --  ST and LG used Cartes 2008 to demonstrate an NFC (Near Field
        Communication) mobile phone, which uses ST's ST21NFCA chip. LG's
        KU380-NFC phone features Paypass contactless payment capabilities
        enabled by a (U)SIM card, as well as contactless reader functions.

    --  In powerline applications, ST announced an agreement with Arkados to
        develop and manufacture a best-in-class 200-Mbps HomePlug AV 'wideband'
        powerline modem SoC. In the 'narrowband' market, modules based on ST's
        highly integrated powerline transceiver ICs are to be deployed in the
        largest Automatic Meter Reading project in China. The metering system
        will remotely collect and manage consumption of water, gas, heat and
        electricity in more than one million households across China.

    --  In power conversion, ST has already received orders for its first 600V
        Power Schottky devices that use silicon carbide (SiC) technology,
        helping designers to increase power density and strongly reduce power
        losses in energy converters. ST also enlarged its ESD protection device
        portfolio with extremely small footprints of 0.18 sq-mm and
        ultra-low-capacitance devices that meet USB, DVI, HDMI and SATA
        standards. Suited for 1 or 2 data lines, these new components provide
        flexibility to portable telecom, consumer and computer application

    --  In analog linear ICs, ST announced new devices aimed at mobile phone and
        portable consumer products, including a new device that combines an
        analog switch and 1.6W class-D audio amplifier IC to simplify board
        design and save space, and a new video buffer IC offering a low
        operating current and the lowest standby current among comparable
        devices. Also in linear and interface ICs, ST gained multiple design
        wins in various markets, including set-top boxes and mobile handsets.

    --  In analog and logic ICs, ST launched a watchdog timer offering a
        chip-enable input to prevent automatic reset generation during in-system
        programming or boot-up. ST also designed-in clock-distribution ICs at
        three major mobile handset makers and an analog temperature sensor with
        a major telecom company in China. And design wins in advanced analog
        included a 3-to-1 HDMI switch for an LCD HDTV from a major consumer OEM
        in Japan, and a significant win with a leading maker in Korea for a
        range of value-priced consumer products.

    --  In discrete semiconductors, ST achieved a myriad of design wins,
        including: MDmesh II-based power MOSFETs for a solar-panel application;
        1200V IGBTs to be used in a UPS application; bipolar transistors for a
        leading printer maker; production ramp up of a UHF RF power chip for use
        in a public-safety mobile radio application; and a worldwide leader in
        UPS qualified a 600V hyper-fast IGBT for a new platform.

Wireless Product Sector (WPS) Highlights

    --  ST-NXP Wireless ramped up production of a 3G cellular platform at a
        tier-one customer. Additionally, its GSM/GPRS solutions continued to
        ramp-up in high-volume at major OEMs and were designed-in at leading
        module makers.

    --  ST-NXP Wireless announced mass production of the world's first 3G
        Unlicensed Mobile Access (UMA) chipset platform, paving the way for a
        new range of converged fixed and mobile phones with enhanced multimedia
        capabilities. The Cellular System Solution 7210 UMA is the first product
        of its kind that combines UMA and 3G technology in a single solution,
        enabling 3G mobile phones to switch from cellular to WiFi networks,
        without breaking the call, allowing users to make cheaper calls and
        conserve their cellular airtime minutes.

    --  ST-NXP Wireless is ramping-up a high-performance audio device for mobile
        music applications with a leading mobile phone maker. The STw5210
        provides outstanding audio quality coupled with longer music playing
        time thanks to its innovative 'Playback Time Extender' (PTE) technology.

Technology Highlights

    --  ST became the first European company to join the Microsystems Industrial
        Group (MIG) industry consortium at the Microsystems Technology
        Laboratories (MTL), Massachusetts Institute of Technology. The MIG is an
        exclusive industry consortium that was founded in the 1980s to support
        the Microsystems Technology Laboratories infrastructure and provide
        direction to the MTL research and educational objectives.

    --  ST and INRIA, the French national institute for research in computer
        science and control, signed a strategic partnership agreement covering
        next-generation embedded systems. ST and INRIA will identify areas of
        research to address complex technological needs, enabling them to
        anticipate and respond to the challenges ahead with solutions shaped by
        real industry requirements.

All of STMicroelectronics' press releases (including all releases in Q4) are available at

BCD and Sound Terminal are trademarks of STMicroelectronics. All other trademarks or registered trademarks are the property of their respective owners.

Some of the statements contained in this release that are not historical facts are statements of future expectations and other forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended) based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those in such statements due to, among other factors:

    --  the current economic downturn and ongoing uncertainty in global economic
        conditions may lead to a further decline in consumer demand in the face
        of tighter credit and negative financial news. Consequently, demand for
        our products could be different from our expectations due to factors
        such as changes in business and economic conditions, the impact on
        demand for semiconductor products in the key application markets and
        from key customers served by our products, and changes in customer order
        patterns including order cancellations, all of which make it extremely
        difficult to accurately forecast and plan future business activities;
    --  our ability to adequately utilize and operate our manufacturing
        facilities at sufficient levels to cover fixed operating costs
        particularly at a time of decreasing demand for our products due to
        decline in demand for semiconductor products;
    --  pricing pressures which are highly variable and difficult to predict;
    --  the results of actions by our competitors, including new product
        offerings and our ability to react thereto;
    --  the financial impact of obsolete or excess inventories if actual demand
        differs from our anticipations;
    --  the impact of intellectual-property claims by our competitors or other
        third parties, and our ability to obtain required licenses on reasonable
        terms and conditions;
    --  the outcome of ongoing litigation as well as any new litigation to which
        we may become a defendant;
    --  the current volatility in the financial markets and overall economic
        uncertainty increases the risk that the actual amounts realized in the
        future on our debt and equity investments will differ significantly from
        the fair values currently assigned to them; we hold significant
        non-marketable equity investments in the flash memory market segment
        through Numonyx, as well as through our current and planned joint
        venture in the wireless segment; declines in these market segments could
        result in significant impairment charges, restructuring charges as well
        as gains/losses on equity investments; our ability to execute
        successfully our plan to close during the first quarter of 2009 the
        merger of ST-NXP Wireless with Ericsson Mobile Platforms;
    --  the effects of hedging, which we practice in order to minimize the
        impact of variations between the U.S. dollar and the currencies of the
        other major countries in which we have our operating infrastructure in
        the currently very volatile currency environments;
    --  our ability to manage in an intensely competitive and cyclical industry,
        where a high percentage of our costs are fixed, incurred in currencies
        other than US dollars;
    --  our ability to restructure in accordance with our plans if unforeseen
        events require adjustments or delays in implementation;
    --  our ability in an intensively competitive environment to secure customer
        acceptance and to achieve our pricing expectations for high-volume
        supplies of new products in whose development we have been, or are
        currently, investing;
    --  the ability of our suppliers to meet our demands for supplies and
        materials and to offer competitive pricing;
    --  significant differences in the gross margins we achieve compared to
        expectations, based on changes in revenue levels, product mix and
        pricing, capacity utilization, variations in inventory valuation, excess
        or obsolete inventory, manufacturing yields, changes in unit costs,
        impairments of long-lived assets (including manufacturing, assembly/test
        and intangible assets), and the timing, execution and associated costs
        for the announced transfer of manufacturing from facilities designated
        for closure and associated costs, including start-up costs;
    --  changes in the economic, social or political environment, including
        military conflict and/or terrorist activities, as well as natural events
        such as severe weather, health risks, epidemics or earthquakes in the
        countries in which we, our key customers and our suppliers, operate; and
    --  changes in our overall tax position as a result of changes in tax laws
        or the outcome of tax audits, and our ability to accurately estimate tax
        credits, benefits, deductions and provisions and to realize deferred tax

Such forward-looking statements are subject to various risks and uncertainties, which may cause actual results and performance of our business to differ materially and adversely from the forward-looking statements. Such forward-looking statements can be identified by the use of forward-looking terminology such as "believes," "may," "will," "should,", "would be" or "anticipates" or similar expressions or the negative thereof or other variations thereof, or by discussions of strategy, plans or intentions. Some of the risk factors we face are set forth and are discussed in more detail in "Item 3. Key Information--Risk Factors" included in our Annual Report on Form 20-F for the year ended December 31, 2007, as filed with the SEC on March 3, 2008. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this release as anticipated, believed or expected. We do not intend, and do not assume any obligation, to update any information or forward-looking statements set forth in this release to reflect subsequent events or circumstances.

Unfavorable changes in the above or other factors listed under "Risk Factors" from time to time in our SEC filings, including our Form 20-F, could have a material adverse effect on our results of operations or financial condition.

Conference Call Information

The management of STMicroelectronics will conduct a conference call on January 28, 2009 at 9:00 a.m. U.S. Eastern Time / 3:00 p.m. CET, to discuss operating performance for the fourth quarter and full year of 2008.

The conference call will be available via the Internet by accessing the following Web address: Those accessing the webcast should go to the Web site at least 15 minutes prior to the call, in order to register, download and install any necessary audio software. The webcast will be available until February 6, 2009.

About STMicroelectronics

STMicroelectronics is a global leader in developing and delivering semiconductor solutions across the spectrum of microelectronics applications. An unrivalled combination of silicon and system expertise, manufacturing strength, Intellectual Property (IP) portfolio and strategic partners positions the Company at the forefront of System-on-Chip (SoC) technology and its products play a key role in enabling today's convergence markets. The Company's shares are traded on the New York Stock Exchange, on Euronext Paris and on the Milan Stock Exchange. Further information on ST can be found at

    STMicroelectronics N.V.

    As at                           December 31, September 27, December 31,
    In million of U.S. dollars          2008          2008         2007
                                        ----          ----         ----
                                     (Unaudited)  (Unaudited)    (Audited)
                                     -----------  -----------    ---------

    Current assets:
    Cash and cash equivalents           1,009           868        1,855
    Marketable securities                 651           726        1,014
    Trade accounts receivable, net      1,064         1,520        1,605
    Inventories, net                    1,840         1,787        1,354
    Deferred tax assets                   233           252          205
    Assets held for sale                    0             0        1,017
    Receivables for transactions
     performed on behalf, net               0            72
    Other receivables and assets          685           694          612
                                          ---           ---          ---
    Total current assets                5,482         5,919        7,662

    Goodwill                              958         1,030          290
    Other intangible assets, net          863           904          238
    Property, plant and
     equipment, net                     4,739         5,065        5,044
    Long-term deferred tax assets         373           370          237
    Equity investments                    510           691            0
    Restricted cash                       250           250          250
    Non-current marketable securities     242           297          369
    Other investments and
     other non-current assets             477           458          182
                                          ---           ---          ---
                                        8,412         9,065        6,610
    Total assets                       13,894        14,984       14,272
                                       ------        ------       ------

    Current liabilities:
    Bank overdrafts                        20
    Current portion of long-term debt     123            63          103
    Trade accounts payable                847         1,156        1,065
    Other payables and accrued
     liabilities                          996         1,165          744
    Dividends payable to
     shareholders                          79           163            0
    Deferred tax liabilities               28            19           11
    Accrued income tax                    106           142          154
                                          ---           ---          ---
    Total current liabilities           2,199         2,708        2,077

    Long-term debt                      2,554         2,487        2,117
    Reserve for pension and
     termination indemnities              332           301          323
    Long-term deferred tax
     liabilities                           27           109           14
    Other non-current liabilities         350           323          115
                                          ---           ---          ---
                                        3,263         3,220        2,569
    Total liabilities                   5,462         5,928        4,646
    Commitment and contingencies
    Minority interests                    276           290           53
    Common stock (preferred stock:
     540,000,000 shares authorized,
     not issued; common stock: Euro 1.04
     nominal value, 1,200,000,000
     shares authorized, 910,307,305
     shares issued, 874,276,833 shares
     outstanding)                       1,156         1,156        1,156
    Capital surplus                     2,324         2,311        2,097
    Accumulated result                  4,064         4,444        5,274
    Accumulated other
     comprehensive income               1,094         1,276        1,320
    Treasury stock                       -482          -421         -274
                                         ----          ----         ----
    Shareholders' equity                8,156         8,766        9,573
                                        -----         -----        -----
    Total liabilities and
     shareholders' equity              13,894        14,984       14,272
                                       ------        ------       ------

    STMicroelectronics N.V.
    Consolidated Statements of Income
    (in million of U.S. dollars, except per share data ($))

                                                     Three Months Ended
                                                   (Unaudited)  (Unaudited)
                                                   -----------  -----------
                                                   December 31, December 31,
                                                       2008         2007
                                                       ----         ----

    Net sales                                          2,264        2,733
    Other revenues                                        12            9
                                                          --            -
      NET REVENUES                                     2,276        2,742
    Cost of sales                                     -1,454       -1,731
                                                      ------       ------
      GROSS PROFIT                                       822        1,011
    Selling, general and administrative                 -304         -295
    Research and development                            -572         -480
    Other income and expenses, net                         6           28
    Impairment, restructuring charges and other
     related closure costs                               -91         -279
                                                         ---         ----
      Total Operating Expenses                          -961       -1,026
                                                        ----       ------
      OPERATING LOSS                                    -139          -15
    Other-than-temporary impairment charge on
     financial assets                                    -55          -46
    Interest income, net                                   3           25
    Earnings (loss) on equity investments               -204            2
    Gain on financial assets                              15            0
                                                          --            -
       AND MINORITY INTERESTS                           -380          -34
    Income tax benefit                                     9           55
                                                           -           --
      INCOME (LOSS) BEFORE MINORITY INTERESTS           -371           21
    Minority interests                                     5           -1
                                                           -           --
      NET INCOME (LOSS)                                 -366           20
                                                        ====           ==

     EARNINGS (LOSS) PER SHARE (BASIC)                 -0.42         0.02
      EARNINGS (LOSS) PER SHARE (DILUTED)              -0.42         0.02

       DILUTED INCOME (LOSS) PER SHARE                 878.1        904.2

    STMicroelectronics N.V.
    Consolidated Statements of Income
    (in million of U.S. dollars, except per share data ($))

                                                    Twelve Months Ended
                                                   (Unaudited)   (Audited)
                                                   -----------   ---------
                                                   December 31, December 31,
                                                       2008         2007
                                                       ----         ----

    Net sales                                          9,792        9,966
    Other revenues                                        50           35
                                                          --           --
      NET REVENUES                                     9,842       10,001
    Cost of sales                                     -6,282       -6,465
                                                      ------       ------
      GROSS PROFIT                                     3,560        3,536
    Selling, general and administrative               -1,187       -1,099
    Research and development                          -2,152       -1,802
    Other income and expenses, net                        62           48
    Impairment, restructuring charges and other
     related closure costs                              -481       -1,228
                                                        ----       ------
      Total Operating Expenses                        -3,758       -4,081
                                                      ------       ------
      OPERATING LOSS                                    -198         -545
    Other-than-temporary impairment charge on
     financial assets                                   -138          -46
    Interest income, net                                  51           83
    Earnings (loss) on equity investments               -553           14
    Gain on financial assets                              15            0
                                                          --            -
       AND MINORITY INTERESTS                           -823         -494
    Income tax benefit                                    43           23
                                                          --           --
      LOSS BEFORE MINORITY INTERESTS                    -780         -471
    Minority interests                                    -6           -6
                                                          --           --
      NET LOSS                                          -786         -477
                                                        ====         ====

      LOSS PER SHARE (BASIC)                           -0.88        -0.53
      LOSS PER SHARE (DILUTED)                         -0.88        -0.53

       DILUTED LOSS PER SHARE                          892.0        898.7

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