STMicroelectronics Reports 2008 Fourth Quarter and Full Year Revenues and Earnings

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.

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