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Mobile Venture First Results

ST-Ericsson reports financial results for its first two months of operation
ST-Ericsson, a joint venture of STMicroelectronics and Ericsson have reported financial results for its first two months of operation from February 2nd 2009.

President and CEO Alain Dutheil commented: "Our sales development in the quarter reflects the broad-based economic downturn that has led to weaker consumer demand for handsets and put pressure on the overall wireless semiconductor industry. Even in such a challenging climate, during the first quarter of 2009 we confirmed our number two position in the market, we renewed our focus on innovation and we strengthened our partnership with key customers. We were the first to consolidate in our industry, creating a new global leader in wireless platforms and semiconductors, and we are currently executing on an alignment of our operations that will allow us to shape the long term success of the company, while creating a sustainable cost structure for the short and medium term. A more efficient and integrated product strategy, based on the future convergence of our 3G roadmap and on our continued commitment on 2G/EDGE and connectivity, as well as a strong focus on next generation access technologies, will help us achieve our short and long term objectives and continue to offer our customers a complete and innovative portfolio of solutions."

Net sales in the two months of operations reflected the economic downturn that led to weaker consumer demand especially in Europe, mainly in the feature phones segment, reinforced by overall inventory reduction in the handset supply chain.

The operating loss of $98 million was a consequence both of the level of sales and of price pressure on margins, partially offset by already planned reductions in operating expenses related to the cost synergies program previously announced by ST-NXP Wireless in November 2008. Net cash [3] was $358 million at the end of Q109.

A restructuring plan is being launched for immediate execution and is due to be completed by the second quarter of 2010. This plan is incremental to the $250 million cost synergies program announced by ST-NXP Wireless in November 2008. Annualized savings of the new restructuring plan are expected to be approximately $230 million upon completion. Restructuring costs are estimated in the range of $70 - 90 million, of which the majority is expected to be recorded during the second quarter of 2009.

The main assumptions of the restructuring plan are: a re-alignment of product roadmaps to create a more agile and cost efficient R&D organization; and a reduction in workforce of 1,200 worldwide to reflect further integration activities following the merger, lower sales volumes and limited visibility on the timing of market recovery.

"In view of the continued uncertainty of the global economy and in accordance with published industry forecasts, we see a continued challenging 2009 for our industry" said Alain Dutheil. "However, we believe that the destocking phase is substantially over, even if we have yet to see signs of a broad-based pick-up of demand in our industry".

In February 2009 the company announced its cooperation with Nokia to provide a Next-Generation Smartphone Platform for Symbian Foundation, with a reference platform based on ST-Ericsson's U8500 single chip. Also in February the company announced its collaboration with ARM to demonstrate the world's first Symmetric Multi Processing mobile platform technology running on Symbian OS.

In March, the company launched fully integrated single-chip solutions for feature-rich, low-cost handsets. ST-Ericsson's 4910 and 4908 EDGE platforms combine the industry's highest level of integration and cost-efficiency, with both digital and analog basebands, RF transceiver and power management unit (PMU) in a single chip. A next-generation mobile audio digital-to-analog converter (DAC) for the mobile music market was also launched. ST-Ericsson's STw5211 further extends the company's wide portfolio of audio solutions with enhanced performance.

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