Wireless net revenues increased 25% sequentially to $650 million. For the second quarter of 2009, Wireless net revenues results reflected the complete integration of the former Ericsson Mobile Platforms business into ST-Ericsson. Net sales growth in the second quarter was higher than normal seasonal patterns mainly due to increased demand in China, driven by TD-SCDMA, and in the rest of Asia-Pacific and to the alignment of inventory to demand levels across the handset supply chain.
Wireless operating results in the second quarter of 2009 exclude $22 million in restructuring charges, as consolidated by ST. Net income attributable to noncontrolling interest of $109 million, including restructuring charges, mainly related to the ST-Ericsson joint venture, is posted below operating results in the Company's Consolidated Income Statement.
For additional information on ST-Ericsson, see www.stericsson.com
ST's operating-segment losses in the second quarter were mainly due to a negative mix impact driven by the market demand in certain geographies, in particular, China.
In respect to the previously disclosed portfolio of unauthorized asset-backed securities, the Company continues to update its accounting valuations, which results in other-than-temporary impairment charges that will be reversed upon collection of the related award from the Financial Industry Regulatory Authority ordering Credit Suisse LLC (USA) to pay ST an amount of approximately $406 million plus interest. To collect, the Company is seeking an enforcement order from the Federal Court in the Southern District of New York.
In the second quarter of 2009, ST's loss on equity investments was $49 million including a non-cash charge of $37 million that represents ST's proportional share of the loss reported by Numonyx in its first quarter of 2009. As of June 27, 2009, Numonyx held approximately $480 million in cash on its balance sheet.
For the 2009 second quarter ST reported a net loss of $318 million, or $-0.36 per share, compared to a net loss of $541 million and $47 million in the prior quarter and year-ago period, respectively.
For the 2009 second quarter, the effective average exchange rate for the Company was approximately $1.34 to euro 1.00 compared to $1.33 to euro 1.00 for the 2009 first quarter and $1.55 to euro 1.00 for the 2008 second quarter.
Cash Flow and Balance Sheet Highlights
Net operating cash flow*, excluding M&A transactions, was $45 million for the second quarter of 2009 compared to $-139 million in the prior quarter and $128 million in the year-ago quarter.
Capital expenditures were down to $74 million during the second quarter of 2009, compared to $89 million in the prior quarter and $272 million in the year-ago quarter.
Inventory was $1.45 billion at quarter end, down from $1.66 billion at March 28, 2009 and $1.84 billion at December 31, 2008. The decrease in the inventory was attributable to sharply reduced fab loadings and an increase in sales. Inventory turns in the second quarter improved to 4.1 turns compared to 2.9 turns sequentially and 3.8 turns in the year-ago quarter.
At June 27, 2009, ST's cash and cash equivalents, marketable securities (current and non-current), short-term deposits and restricted cash equaled $2.9 billion. Excluding cash and cash equivalents and marketable securities of $320 million related to ST-Ericsson, a $250 million restricted cash deposit as collateral for the Hynix-Numonyx loan and $170 million of non-current securities the Company's liquidity totals $2.1 billion. Total debt was $2.66 billion. ST's net financial position* was net cash of $205 million compared to a net debt position of $545 million as of December 31, 2008. Total equity was $8.67 billion, including noncontrolling interest of $1.32 billion.
(*) Net operating cash flow and net financial position are non-U.S. GAAP measures. For additional information please refer to Attachment A.
First Half 2009 Results
Net revenues for the first half of 2009 decreased 25% over the year-ago period due to weak industry conditions that more than offset the net impact of M&A transactions.
Gross margin was 26.2% of net revenues, compared to 36.5% of net revenues for the 2008 first half, reflecting significantly lower volumes and operating inefficiencies due to weak industry conditions. Net loss, as reported, was $860 million in the first half of 2009, or $-0.98 per share, compared to a net loss of $131 million, or $-0.15 per share in the first half of 2008.
On a year-over-year basis, the US dollar strengthened by approximately 12% as the effective average exchange rate for the Company was approximately $1.33 to euro 1.00 for the first half of 2009, compared to $1.51 to euro 1.00 for the first half of 2008.
First Half 2009 Revenue and Operating Results by Product Segment
In Million US$ and % First Half 2009 First Half 2008
--------------- ---------------
Operating Operating
Net income Net income
Product Segment Revenues (Loss) Revenues (Loss)
--------------- -------- ------ -------- ------
ACCI 1,349 (112) 2,146 60
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IMS 1,093 (5) 1,637 227
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Wireless 1,169 (232) 758 (10)
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FMG (Flash Memories
Group) NA NA 299 16
-- -- --- --
Others 42 (472) 29 (407)
-- ---- -- ----
TOTAL 3,653 (821) 4,869 (114)
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