“Fourth quarter sales and gross margin were well aligned with our guidance within a weak market, enabling ST to deliver a solid cash flow performance in the quarter and for the year in total,” said Carlo Bozotti, STMicroelectronics president and CEO.
“During 2015, we have increasingly focused our R&D and sales and marketing efforts on two areas: Smart Driving, enabled by digitalization and electrification, and the Internet of Things, including portable and wearable systems as well as smart home, city, and industry applications,” Bozotti noted.
“Our products, technologies and system applications competencies are optimized for these areas, which we address with our products for Automotive and Industrial, our microcontrollers and digital ASICs, our analog and power portfolio as well as MEMS and specialized image sensors,” he added. “The growth recorded in 2015 by our microcontrollers, and the solid performance of our automotive business despite weaker macroeconomic conditions, have been mainly driven by our sharpened, market-driven investment focus.
“Today we are announcing that we will discontinue the development of new platforms and standard products for set-top-box and home gateway,” Bozotti concluded. “This difficult decision is consistent with our strategy to only participate in sustainable businesses and is due to the significant losses posted by our set-top box business over the past years in an increasingly challenging market.”
Net revenues in the fourth quarter decreased 5.5% sequentially to $1.67 billion. By region of shipment, EMEA, Greater China & South Asia, Japan & Korea, and the Americas decreased by 2.8%, 5.2%, 7.6%, and 8.6%, respectively, on a sequential basis.
On a year-over-year basis, net revenues decreased 8.8% or 5.5% excluding negative currency effects and mobile legacy products.
Fourth quarter gross profit was $559 million and gross margin was 33.5%. On a sequential basis, gross margin decreased 130 basis points, reflecting the impact of unused capacity charges of about 180 basis points and price pressure partially offset by favorable currency effects, net of hedging, manufacturing efficiencies and favorable product mix. On a year-over-year basis, gross margin decreased by 30 basis points, mainly due to price pressure and lower sales of licenses largely offset by favorable currency effects, net of hedging, manufacturing efficiencies and favorable product mix.
Free cash flow was $148 million in the fourth quarter, compared to $85 million and $208 million in the prior and year-ago quarter, respectively. Free cash flow was $327 million in 2015, compared to $197 million in 2014.
The company’s net financial position improved to $494 million at Dec. 31, 2015 compared to $459 million at Sept. 26, 2015. ST’s financial resources equaled $2.11 billion and total debt was $1.61 billion at Dec. 31, 2015.
Net revenues of $6.90 billion for the full year 2015, represented a decrease of 6.8% in total or negative 3.3% excluding unfavorable currency effects and mobile legacy products. MMS revenues increased 7.2%, with all other product lines decreasing.
Gross margin improved 10 basis points to 33.8% of net revenues for the full year 2015, compared to 33.7% of net revenues in 2014, with the margin improvement reflecting manufacturing efficiencies, favorable currency effects, net of hedging and favorable product mix largely offset by price pressure. Operating income, as reported, decreased to $109 million in 2015 from $168 million in 2014 principally due to lower revenues.
“Over the next years, the main growth contributors to the semiconductor market will be Automotive, Industrial and Internet of Things applications,” Bozotti said. “We are deeply focused on winning in these markets and on capturing the opportunities they represent to fuel growth for ST, starting from 2016.”