意法半導體 (STM) 2011 Q4 法說會逐字稿

Ladies and gentlemen, good morning, or good afternoon.

Welcome to the Fourth Quarter and Yearly 2011 Financial Results Investors and Analysts Call.

I am Myra, the Chorus Call operator.

(Operator instructions).

The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Ms.

Claudia Levo, Senior Vice President of Global Communications.

Please, go ahead, Madame.

Thank you, Myra.

Good morning and afternoon to everyone.

Thank you for joining our fourth quarter 2011 conference call.

Hosting the call today is Didier Lamouche, ST-Ericsson's President and Chief Executive Officer.

Also, joining him on the call today are Jorgen Lantto, Executive Vice President, Chief Technology Officer, and Head of Strategic Planning; Timothy Lucie-Smith, Chief Financial Officer; Marc Cetto, Senior Vice President, Smartphone and Tablet Solutions Business and Connectivity Business; and Fabrizio Rossini, our Head of Investor Relations.

This call is being broadcast live over the Web and can be accessed through the ST-Ericsson Investors Website.

A replay will be available shortly after the conclusion of the call until Tuesday, January 31 at six o'clock p.m.

CET.

Today, we will be making forward-looking statements during the call.

These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties.

The actual results may differ materially due to factors mentioned in today's press release and discussed in this conference call.

We encourage you to review the safe harbor statement contained in the press release that we issued with the results.

As usual, a reminder.

Please, limit yourself to one question and a brief follow-up question.

And now I would like to turn over the call to Didier Lamouche, ST-Ericsson's President and Chief Executive Officer.

Thank you, Claudia.

Good morning, and good afternoon, everyone, and thank you for joining us today.

As you all know, it's my -- I'm honored that it's my first conference as the CEO of ST-Ericsson.

And I shall admit today has been quite an intense day, like the seven prior weeks that I have spent currently in the job.

To be honest with you, of course 2011 results are not my results.

I endorse them fully, but they are not my results.

So I will -- I don't know them by heart like Tim does, so I will let Tim comment those in a second.

And I'm sure that all of you are extremely eager to understand my plans, the strategy going forward, and already will be asking a lot of questions on what will be such action going forward.

So, of course, and I want to be straight with you and direct with you, I hope I'm not going to disappoint you in not having all the answers.

But, as you can imagine, I'm still in the learning phase.

But, as some of you know me already from my prior job in STE or before, I will be (spoken in French).

I will be very open to give you after Tim's presentation my first impression and feedback of those seven weeks passed in the job and maybe to give you some directions on what we will be heading to in the coming weeks and months.

So, before going to that, Tim, you have the floor.

So, let me provide a few details on our financial performance in Q4.

Sales, $409 million in the fourth quarter, were 0.7% lower than the previous quarter.

However, if we exclude IP licensing to a third party, which represented $12 million in Q4, they actually grew 1.3% over Q3; so, roughly in line with our previous guidance.

Sales for the full year 2011 ended up at $1.65 billion, which are down 28% on the prior year due to the significant decline of sales of legacy products.

Revenues from new products continued to grow in Q4, compensating the decline of the legacy portion of our portfolio.

Operational and financial conditions remained challenging in the fourth quarter, and they resulted in an adjusted operating loss of $207 million, slightly higher than that reported in the previous quarter.

The difference was mainly due to the lower contribution from the IP licensing revenues in Q4, which were $12 million in Q4, compared to $20 million in Q3.

Also, we saw a lower number of vacation days, which impacted OpEx, and this was only partially compensated by some positive effects of the changes in exchange rates.

The net loss for the quarter was $231 million, which was after charging interest expense of $6 million and recording a deferred tax benefit of $17 million.

In Q4, we managed to reduce considerably our inventory.

It decreased by $58 million, or 21%, reaching $223 million at the end of the quarter.

We started to reduce our production planning during the first half of 2011.

In June, we saw the first effect, and that continued in Q3 and in Q4.

For Q1, we do not foresee any further inventory reductions.

Our net financial position changed from a negative $594 million position at the end of Q3 to negative $798 million at the end of Q4.

The increase in that negative net financial position was due mainly to the operating loss, together, of course, with CapEx and restructuring payments, and only slightly mitigated by the actions that we took to reduce working capital.

During Q4, we sold trade receivables without recourse.

$144 million were outstanding at the end of the quarter, and that was a sequential decrease of $18 million compared to the previous quarter.

We had $800 million in short-term credit facilities provided by shareholders, and that was fully utilized at the end of Q4.

Our parent companies will continue to support the transitional financial requirements that we have and fund our R&D investments and will extend the short-term credit facility on a quarterly basis.

You'll notice that we provided some additional information regarding our balance sheet as an appendix to this quarter's press release.

And let me now also provide you with a brief update on our restructuring plan, which was announced on June 23 and is currently in progress.

The plan is targeting $120 million of annual savings in operating expenses.

Implementation is on track, and the amount of savings realized so far is $11 million a quarter, which, on an annualized basis, represents $44 million, or around 35% of the total savings expected.

We expect to realize the full amount of the planned savings by Q4 2012.

So let me turn the call back to Didier now for his further comments.

So, as I have said earlier, it's clearly too early for me to present to you a detailed strategy and the plan with milestones.

But I am happy to share with you my first impression and how we are outlining our roadmap to a sustainable profitability and meet our stakeholder expectation.

During those first two months, I have currently visited more than 30 executives belonging to our major customers and prospects, and including last week in Las Vegas at the Consumer Electronics Show.

The most unanimous, positive feedback I received has been their support, their appreciation for our products, as well as many, many requests to be always fast, accurate, and better in execution.

Our customers want, really, a competitive ecosystem of suppliers, where they are the good alternatives.

They don't want to be stuck with only one big, important, good, and dominating supplier.

They really want us to succeed and to benefit from our -- and to have them benefit from our excellent technology.

But, also, on top of that, they clearly passed me the message that they need an impeccable execution from all their suppliers, including us, in order to be first on the market.

And that's clearly one point where we will have to progress and put a lot of focus and emphasis going forward.

Our Company has started already last year to enlarge its customer base, which, as you know, has been the weak point of the Company, as we were, basically, relying some years ago on three major customers only.

And this is a fundamental part of the strategy that we have been following and which has been started by my predecessor.

This quarter, we confirm that Motorola is one of our new customers for our Thor HSPA+ 21-megabit thin modem, as well as the already announced wins with Sharp and Panasonic this past quarter.

In 2012, our priority is to ramp those products in volume with many customers.

During these two months, I have also met not only our customers but also more than 2,000 of our employees at our sites around the globe.

Clearly, I was positively impressed by the energy there.

Although the Company is under difficulty, as you know, which is, by definition, not helping the morale, I would say, I was positively surprised at the energy that I found here and there, as well as the willingness to support the turnaround, despite, again, the deep understanding of the challenges that we face.

So that's a real positive point.

During those seven weeks, also, our parents ST and Ericsson, have devoted significant time and support to listen and to advise me.

I have confirmed and gotten their renewed commitment, and it is of paramount importance for us, as you can imagine.

And, clearly, the fact that I am here can testify that I have got and secured their long-term support.

We cannot and we will not disappoint them.

Finally, during those two months, I have learned a lot about our product portfolio, and I am convinced that ST-Ericsson has what it takes to succeed in terms of assets and products.

ST-Ericsson has a strong IP portfolio in telecommunication, application processing, and multimedia.

And, through our shareholders, ST and Ericsson, we have access to two of the richest IP portfolios in the industry.

For me, a few products in particular stand out, setting us apart from the competition.

First, our NovaThor U8500 products that offer industry-leading performance for a platform which is integrating modem, application processor, and connectivity -- those are the reason why five of the top OEMs have chosen to work with us on developing devices based on our NovaThor platforms.

At CES, again, in Vegas, I was pleased to see a new handset design by Via Telecom that is based on the NovaThor U8500.

It is one of a number of NovaThor U8500 based devices that we look forward to sharing with you throughout 2012.

On the modem side, clearly, our Thor 21 megabits per second thin modem products were the first to power high-speed, mobile broadband smartphone and continue to [be delivered] fast and highly powered, efficient connectivity to new customers and devices.

As already mentioned, we were able to announce products with Motorola, Panasonic, Sharp during the quarter based on our Thor 21 megabit per second modems.

Our next generation of modems, the Thor M7400 is clearly a groundbreaking multi-mode device.

It is a first device fully LTE for the next generation, the first -- and it will be the first on the market at the end of this year or beginning of next year.

It is a truly global product, combining LTE FDD/TDD/HSPA+, TD and CDMA, as well as legacy 2G standards in an innovative architecture that will be able to deliver [five] power and bill of materials benefit versus competitive solutions.

It will be clearly the most competitive solution on the market in the quarters going forward.

I am apparently not the only one who thinks this, since, besides the strong customer interest that I have been able to sense personally during those last seven weeks, we currently have for this product -- we have been selected as CES innovation 2012 design and engineering award honoree in the embedded technologies product category.

So, now, it's simple.

That's what I said to the team.

We need to bring this product to life as soon as possible and embed it in as many cell phones as we can and [more apps] as we can.

I am looking forward to sharing a bit on this groundbreaking project with you on future calls and meetings.

So, I mentioned customers.

I mentioned employees.

I mentioned our shareholders, products, all of that, just to remind you of the potential of this Company.

However, clearly, the short term is challenging.

That's why I'm here.

That's why we are all here.

From a financial perspective, we are clearly challenged, and it will continue to be as such over the coming quarters.

I'm sorry, but I'm not coming today with groundbreaking, good news.

It will be very challenging, starting by the quarter in which we are in.

I want you to be fully aware that up front.

2012 will be very difficult.

The first quarter will be tough also from a revenue point of view, due to a combination of factors, including, first, the seasonality effects.

On top of it, we had one of our customers which is exhibiting high inventory, and, third, the continuous decline of legacy product sales that we are encountering, especially at one of our major customers.

So, in the short term, all those effects will cumulate and will produce a quarter which is in a recess compared to Q4.

But let me assure you that we have already started to work on what we call -- what I call our roadmap to success.

In a nutshell, this roadmap -- this multiyear roadmap will be targeting, clearly, the return to profitability.

While we are still in an early stage in terms of details, we have already defined the first immediate steps.

Those steps are three.

The first step is already ongoing since December 1.

It's about auditing our strengths, areas of improvement, and when we can accelerate the turnaround.

This included also a review of our portfolio of products in order to boost those key R&D programs that are key to success.

This phase will extend from December to end February.

The second step is about building our strategic plan, three years, and the leadership team who will execute on such a plan.

It's a matter of several weeks for us to complete and communicate it.

This phase will extend from February to March.

And then the third step will be to align internally all the organization, all the people, all the managers on this plan and steadily, relentlessly execute on it.

This will be deployed on [April 1].

I know that you are all already very curious to know more about this, and I understand you.

Would be in your shoes, would be the same, especially since we -- after all the quarters we have gone through where, clearly, you expect quickly a turnaround of our Company.

Again, I'm sorry to say, but it's a bit too early for me to (technical difficulties) side dates and numbers.

But be assured that -- and that's why I'm here.

We've been working fast to deliver upon our stakeholders' expectation.

Let me repeat myself.

Our Company has a huge potential.

You should actually view our Company as a three-years-old startup with immense potential in terms of IP, both coming from Ericsson, coming from ST.

We need to turn that into an immense success and strong revenue growth.

It's now over three years of existence.

It has been operating in a very challenging environment.

On top of that, as you know, we have been experiencing a strong market downturn and an expected collapse of two out of the three initial, most important customers that we had when this Company was founded.

So, clearly, and it's not an excuse, but, as those are facts, those are clearly the reason why the transformation -- I prefer that word as restructuring -- the transformation of this Company takes, clearly, longer than expected.

I have gone this way before in different circumstances, but I can tell you I am convinced that we have more potential here that I have seen before in similar experiences that I have gone through.

So, of course, also the environment is much tougher, but, with patience, hard work, relentless efforts, and a good management team, I'm sure we are going to pull this Company out of the difficulty it is in today.

So we have also clearly enlarged in the past our customer base.

This is a key element of our strategy.

I said before we started with three main customers.

The prior -- the team has already, with the prior management, clearly enlarged our customer base.

What we need to do is to bump up the volume that we are selling to those new customers.

It's clearly not enough today, and this is clearly one priority that we must tackle.

This is why I am confident -- okay?

-- that we can make it and that we will succeed.

Now, I think I'm coming to the end of this piece.

I would like to thank you for your attention and would like to open the floor for your questions.

Operator, please.

(Operator instructions).

[Amit Harchenani], Citigroup.

My question revolves around the operating expenses being cut by ST-Ericsson.

Could you just help me understand the proportion of the different elements that constitute your operating costs; for example, how much would be the rent or leasing costs, wage (inaudible), any support in form of common grants or funding that you get.

Just trying to get an idea of what is it that you would be targeting as a part of your plan.

And, as a follow-up on that, you spoke about employee morale.

Wouldn't you say that the continued restructuring and the lack of profitability over time has made it difficult for you to retain your talent, in turn hampering your efforts to increase profitability or efficiency?

Thank you.

Okay.

I think your question was not very -- I think you were asking some more details and breakdown of the operating expense.

Right on the first question?

Right?

Yes.

What are the main constituents?

I'm not sure we publish all --

No, we don't, Didier.

But, I mean, it's -- clearly the largest part of our operating expense is R&D.

We're spending on product development expenses for all of the range of products that we have, and that is, by far and away, the largest proportion of R&D expense.

And, obviously, we plan for that to reduce in terms of percentage on sales as we can build up our level of sales.

I don't know if that answers the question, but that's what I can say.

The second question I'm not sure we -- came out clearly.

It's on retaining talent with all the restructuring (inaudible) in terms of morale of our employees.

Clearly, retaining talent -- I think this is an excellent question.

This Company has gone through four different, successive restructuring plans.

This is clearly, let me be blunt, too much and not only too much in terms of amplitude, but it is too much in terms of numbers.

People cannot live constantly every year with a restructuring plan.

So what I intend to do is, first, not telling you about restructuring.

It's in fact showing them the more global picture, why we do things, and not only do restructuring but doing a transformation plan.

Transformation goes from roadmap redefinition to [site mission] redefinition to skills training so that everybody has a vision of where we go and how we go.

That's the first thing.

The second thing to do is clearly to demonstrate and advertise what I call low-hanging fruit in terms of results because my experience is that the first motivation elements of any company are the results.

As soon as you start to get results, then you get the traction, then you get attraction of new and good people and good talent, and then you start again in a positive circle as opposed to a vicious circle.

And the third point, of course, is we want to do, because, in some critical places, yes, we have some retention challenges.

So we are already, starting December 1, put in place some specific, targeted retention packages in order to pass clearly the message to our top talent that we are counting on them.

And the fourth action that I have already started, which is already [done] in the Company, is we have started an assessment plan of our top 100 talents in the Company, managers and leaders, so that we identify clearly where the potentials are, where the gaps are, and how we can train and enhance people's skills, competence, and motivation.

So this has been -- this is being done at the moment, as we speak, with a very worldwide, renown, outside HR firm.

This has been started December 26, actually, immediately after Christmas.

I don't know if I answered your question, but I tried to be as exhaustive as possible.

That's very helpful.

Thank you so much.

Edward Snyder, Charter Equity Research.

You mentioned that you're having a significant slowdown in one of your major customers, some of it inventory, some of it the legacy phone demand declining.

Can you give us some sort of color of how that breaks out?

Do you expect that most of it is an inventory issue, or are you seeing demand slow down?

And then I had a follow-on.

I think the first phase, again, is to consider our natural -- not natural -- our historical seasonality Q4 to Q1.

That gives you a good base.

On top of that, I think the first factor is clearly the legacy product sales erosion that you have to plug on top of that.

And the third factor is the inventory reduction at one of our customers.

I cannot give you more precise numbers at the moment.

But that's how the factors are playing in terms of order of magnitude.

Thank you.

That's helpful.

And, then, you've outlined a fairly comprehensive evaluation of the situation and the Company, the talent, the plan, et cetera, that will take you, probably, through almost midyear or so.

And, given that you're going to implement a transformation plan, this has to have some sort of effect on development.

Given that you're already kind of behind the curve on the LTE products, why shouldn't we expect a further delay in this product, given how strong Qualcomm's first showing of the 8960 is and how many people are picking that up, including some of your customers, like RIM.

It seems to be the case that another reorganization or transformation will further retard your progress in an area that you're already far behind on.

What are you going to do to prevent that from happening?

Okay.

That's an excellent question.

That's an excellent question.

Of course, again, restructuring is not the goal in itself.

Okay?

Restructuring is one element of the transformation plan but one among others.

I'll tell you today we are losing -- we lost this total year over -- I'm trying to find the numbers.

We lost over $800 million over the year.

Okay?

So the first priority is to get product out of the door -- (inaudible) product out of the door so that we are bumping up the top line very quickly.

So it's clear that we must stop at the same time to do, let's say, resource adjustment and, at the same time, pushing our leaders and our engineers to execute on time their product development.

That doesn't work (inaudible).

So the priority is -- the places where I will have priority -- clearly, the priority will be to execute on our technical roadmap.

That will be the first priority.

And the one you mentioned is clearly the priority.

We believe that -- you say we are late.

I don't believe we are late, actually.

I believe we will be early on the next-generation LTE because the product, the 7400, as demonstrated by the award we have received and by the attention that many, many, many customers on interest that many, many, many customers demonstrate, will clearly be, if we can put it on the market timely, the first of this generation on the market.

So, believe me, I will put the focus and the priority in executing the development plan for this product as opposed to saving costs.

Okay?

Having said that, it doesn't mean that we cannot save costs or efficiency anywhere else.

Okay?

The management and the leader of talent assessment that you mentioned is not going to take us six months.

We are starting already.

We have started, as I told you, very quickly, end of December by doing an assessment for the top 100 leaders.

And why were we able to do that?

Because the team has worked already.

The team which is in place already has already some data, has already some -- a lot of data through the, let's say, employee engagement survey, for example, that has been done year after year and which is constituting an excellent database on which you can start to work on.

So, to cut a long story short, no, it's not going to take six months.

For me, it's going to take one quarter.

And, in parallel, we are going to put the pressure and the focus where the priority is, getting the key products out of the door and make our organization more efficient in terms of accountability.

Those are the priorities.

Then, if I could, one more perhaps.

It may be a little bit early in your tenure to come to this conclusion now, but, given your assessment so far, where do you think the core problem with ST-Ericsson lies?

You've got design -- is it design?

Is it technologies?

Is it customer base?

You've got design centers spread all over Europe.

If you look at your competitors, they tend to be focused in one particular area and most of them in Asia, so they move very quickly.

Is it a cultural issue?

Where do you think you're going to have to concentrate most of your changes in order to make ST-Ericsson competitive, especially on an execution basis?

Okay.

Given the question you're asking, you're pretty -- very familiar with the Company, maybe more familiar than me to the Company, so why don't you come to work with me?

Right?

-- to identify -- but your questions are pretty precise.

No.

I think you said it right.

The first question is accountability.

The first point is accountability.

Our organization today is not promoting accountability end to end.

And I think it's an organization which is more favoring synergies, which I think is not the priority for the Company today, first.

Second question is simplifying the way we do things.

And, clearly, what you said is -- I cannot deny it.

We probably are too much spread around.

We probably would benefit in having, let's say, less broader base of sites around the world and maybe better identification of the mission of each site.

And that would simplify clearly and vastly the execution.

So that's probably where we suffer the most today, if I can tell you.

Then, our next -- the first point is clearly to maybe not enlarge the number of customers that we are engaged with, which is already pretty significant but balance more our revenue distribution across all those customers.

I mean by that putting more focus in sales in the customers in which we want to grow as opposed to customers in which we are already present.

So, in a nutshell, I don't want to give you more detail for the moment, but I don't know if that answers your question and if that rings a bell to you.

That was very helpful.

Thank you very much.

Gareth Jenkins, UBS.

Two quick ones, if I could.

Well, one quick one and one long one.

Firstly, just the quick one.

Can you just give us a sense of the percentage of legacy within your revenue now and where you see that going over the next 12 months?

And then, just secondly, on the apps processing business, it comes back to a question I think you were asked earlier at the analyst day.

I just wondered -- given that 50% of the apps processing market is effectively captive at Apple and Samsung, the other 50% is very competitive among a variety of vendors.

Do you see any rationale in kind of easing back on apps process development and just literally focusing on modem connectivity, or do you still see that the turnkey solution is the only way forward?

Thank you.

Okay.

Thank you for your two good questions.

I think I will ask Tim to answer the first one.

The new products sales is around about two-thirds and legacy around about one-third.

So it's -- we've increased the proportion during Q4 compared to Q3 of the new products.

However, it's fair to say that this kind of measure -- now that we've gone way over 50%, I don't think it has so much meaning going forward, and we probably won't be disclosing that going forward.

We won't be providing that information in the future.

Okay.

The second question is about the modem-only strategy.

Right?

If I understood right.

Again, I don't pretend yet to be an expert of the industry, but let me give you a few observations.

Clearly, when I see the competitive landscape in which we play, clearly I don't want to name our competitors -- you know them all, but Qualcomm, the Broadcom, the NVIDIA, the Marvell, the TI, et cetera, et cetera.

Qualcomm is the only one who has today a solid -- a very solid modem technology, and they have acquired after that, clearly -- or they have gone into the application processor space.

All the others are mostly coming from the application processor side, and they have tried to acquire some knowledge and skills and IP on the modem side.

It's the case of NVIDIA.

It's the case of Broadcom, et cetera, et cetera.

So that tells me that -- and they didn't drop the application processor part of their business.

So that tells me that the modem -- and by the way, the other competitor, which is Infineon -- which was Infineon, which was the only one of the modem-only in the thin modem -- having a thin modem strategy, only, was, as you well know, acquired recently by Intel, which is, by definition, at the center of gravity, the obvious way [in today].

So, for those reasons, these observations tend to indicate to me that the modem-only strategy -- I'm really not convinced this is the right strategy.

Plus, on top of that, the market is very thin.

So I'm really am not convinced this is the right strategy for the Company.

I'm also not convinced that we can do everything by ourselves because the market is extremely competitive, as you mentioned.

Absolutely.

So we need to put all the best expertise together in order to execute.

That's why I favor more a strategy around alliances, capitalizing on our strength, which is our understanding of application processors, our knowledge of application processors around ARM, using also the ST expertise, as you know, as was mentioned this morning, and also capitalizing on our unique, competitive advantage, which is the deep IP portfolio we have in modems, which is second to nobody, maybe except Qualcomm.

So that's my answer in a nutshell.

I don't know if I was clear.

Thank you.

Yes.

Tristan Gerra, Robert W.

Baird.

In terms of the inventory reduction at your customer, how much do you think of this is based on a transition that customer is making to different suppliers versus their own market share shift?

If your question is -- what is the reason for the inventory reduction, it's a purely efficiency effort coming on our side.

No.

I think he's talking about the customer inventory.

Ah, customer inventory.

The customer inventory reduction is that the customers -- we had certain commitments with these customers.

They took a certain amount of inventory in Q4.

We had certain agreements.

And that inventory will take a few quarters to consume.

That's basically the logic behind the reason.

Okay.

And would you say that the inflection point at that customer is mostly done in Q1, or will you expect that there's going to be more significant declines beyond Q1?

I'm just trying to see how much of their inflection point has already taken place versus what we should expect for the rest of the year.

The impact of that inventory is not only in Q1.

Obviously, it's significant in Q1, but they will take also some impact in Q2.

Very good.

Thanks so much.

Janardan Menon, Liberum Capital.

Just to follow up on someone's answer that you gave for the previous question, which is the big drop from a falloff in, say, Symbian-related businesses at your customer.

Will that be coming to an end in Q1?

And, if there is a further downward pressure in Q2, is that going to be just the remnants of the inventory correction?

Or would legacy business continue to be a drag on your business beyond Q1 as well?

And a couple of other questions, if I may.

One is -- when do you expect the ramp at some of your new customers to start off with?

Is that something which one can expect to start making an impact from Q2 itself?

Or would that be more a sort of second-half-loaded affair?

And, lastly, one of your points on Q1 being weak was that, you've said, that there's been a reduction in the short term of new product sales with one of our largest customers.

I was just wondering what that new product sale reduction refers to.

Is that also an inventory correction, or is there some other factor which is slowing down new products sales at this customer?

Okay.

So, on the legacy -- as you know, the legacy product line that we have is largely depending on one major customer.

And, for that, it's okay, as you obviously understand.

I mean, we have the visibility that we have.

So I cannot say today that it's going to correct after Q2.

It really depends on the sales flow development at this customer.

Regarding -- what was the second question?

Regarding the new product --

Ramp up of new products -- new customers.

Clearly, we see that today more in H2 this year than in H1.

That's clearly obvious.

And, finally, on the new product ramp at one larger customer, it's the same answer than the first one.

I mean, I don't want to comment and give you names of customers, clearly.

But, if you do some search, you can immediately understand who that is and understand why we don't have today -- we are not meeting today the forecast expectation that we were having a quarter ago and even a month ago on those advanced products.

I can maybe just add.

Didier is giving some guidance on some of the factors involved in Q2, but we're not giving any guidance on the numbers for Q2 sales.

We're limiting our guidance in this quarter, as we have done previously, to the Q1 and the following --

Sure.

Maybe just to go back to the legacy part, you've said that, at the end of Q4, legacy was one-third of your business roughly.

And, clearly, it is that legacy part which is taking a big fall into Q1 as well.

So can't one come to a conclusion therefore that the legacy business is going to be quite small by the end of Q1, perhaps like 10% of your business or something like that?

We can't give you any numbers at the moment.

But, yes, the first part of your answer -- of your point is, yes, it's going to be quite small.

It's going to be, yes, much smaller in Q1 than it was in Q4, clearly.

Yes.

Thank you very much.

Matthew Hoffman, Cowen and Company.

This is [Bryan].

I'm in for Matt.

So, our question is about -- following up on the last question, really, about the current environment and the outlook for 1Q.

If we're seeing a market that looks like it's trending below seasonal in an aggregate, and you've indicated a significant drop off in sales for 1Q, could you do a better -- ?

Could you help us bracket that a little bit better?

Is it unreasonable to assume that the decline could be more than 30% sequentially, something that takes the run rate to under $300 million per quarter for 1Q?

And is that sort of the new baseline run rate

Again, I repeat.

I think I gave the answer already, more or less.

I cannot give you more precisely than this one.

But take our historical seasonality and plug on top of that the additional factors that I gave you.

And I'm sure with your experience you're going to find the right bracket range.

I'm sure.

Just as a reminder, the seasonality, including the legacy products, declined that we experienced in -- sequentially Q1 to Q4 in both 2010 and 2011 was between minus 18% and minus 23%, sequentially.

No.

That's good.

Thank you for that.

And then, I guess, a question on -- should we expect maybe some financial support from the parent company -- companies again here in 2012?

Yes; absolutely.

Absolutely.

I have their commitment clearly.

You can imagine that before having the honor and the chance to take such a job, I was ensuring before that I have at least the money and the finance to be able to run the transformation before jump in.

So, yes.

The answer is yes.

All right.

Thank you, gentlemen.

Lee Simpson, Jefferies.

Maybe, if I could, ask again about the legacy sales erosion at the one customer.

Can you assure us at this point that the slowdown in these legacy sales are -- they're just a function of end of product cycle, if you like, you know, sort of a big, cast-off contract at the end of that cycle, and that it's not a design-out by arrival.

And maybe as a follow-on question, can you give us an update on the A9600 platform that you announced last year?

Are we sampling at customers?

When do you expect first shipments?

And how do you feel this platform can compete or this app processor/platform can compete with the new Snapdragon S4 and OMAP 5 releases?

Okay.

On the first -- I think the answer to your first question is yes, clearly.

Huh, Tim?

Yes.

I think the answer to the second one -- I think I will ask to Marc to answer to this one.

Marc, if you could, take the lead on that one.

Yes.

Good afternoon.

So, the question is on the A9600.

We are still on plan to sample it later on this year.

How will it compare to the competitive products you mentioned?

Very well.

But we are not disclosing any more at the moment.

But we have a combination of architecture and technology -- process technology that we are using that will make some breakthrough on the number of [MIPS] we can put in a smartphone fitting the thermal budget of the phone.

Thanks.

Brett Simpson, Arete.

Regarding the Windows phone efforts you have today, can you really just talk about when we may start to see first products shipping?

And you've made a big investment over the last couple years around Symbian, which we all know hasn't worked out.

So, looking at your efforts around Windows phone, do you have any guarantees in place with your customers today?

No.

I will answer the second question first, and then I will ask Marc again to answer the first one on the timing, time to market, et cetera.

No.

I mean, we have no guarantee.

But, of course, I'd love to have some commitment.

But, at least, the way we work with this customer, we know that they are worrying pretty early in time.

And, usually, when you are worried, you are worried.

Now, after that, the guarantee and the volume -- there is no guarantee.

It depends, really, on the success of the market.

But, if they are successful, we will get the volume.

That we know.

That we know.

Typically, we discussed (inaudible).

Now, on the time to market, I will ask Marc to answer on this one also.

Sure.

Yes.

So nothing more to say than what we've said before.

I mean, we have been selected by a customer for future Windows phone products.

What I can say, and we said it already, is, as you know, Windows phone 7 or 7.x is quite limited in terms of the hardware platform it can support.

So, we already said that what we announced will be applicable to Windows phone 8.

Okay.

And just a couple of quick housekeeping questions.

Can you give us a sense for how your inventory splits between legacy and new products?

And, also, maybe give an update on headcount levels at present for all of ST-Ericsson.

Thank you.

I could say that our inventory is split fairly evenly across all of our product ranges.

So I would not say that we have any particular peaks of inventory on legacy products as compared to new products in our inventory.

The second question was?

How many people do we employ, the headcount?

We have -- at the end of the last quarter, we had roughly 6,500 employees and contractors; so, looking at the sum total of (inaudible).

Including contractors.

Okay.

Thanks very much.

[Neil Stafford], ING.

Just to help me a bit on revenue trends going into Q2, could you maybe help us?

What in your view would be a normal seasonal pattern from Q1 going into Q2?

You mentioned that for Q4 versus Q1.

Could you maybe do that for the next quarter as well?

Well, I need a little bit of time to find out the answer.

So your question was the normal seasonal between Q1 and Q2.

Right?

Not Q4 to Q1.

No, no.

Q1 to Q2, because your -- it's clear that you're not giving any guidance on your Q2 expectations.

But that might help us a bit to do some calculations.

I think, if I believe my finance team here, the term is between plus 4 and plus 6.

Plus 4 and plus 6.

Okay.

Sequential.

Yes, sequential.

Sure.

Okay.

That was the question I had left.

Thanks a lot.

So, if you have no more questions, thank you, first, for the numerous questions you asked.

I hope we were able to shed a bit of light on what we do.

Let me conclude quickly with a few final remarks.

Again, on the financial perspective, and I'm sorry not to bring you better news, but, clearly, this year will continue to be a challenge, and for the coming quarters, we will be challenged again as we transition the volume production to a larger base of customers that we have today.

Okay?

But, clearly, my firm objective is to be the solid roadmap to sustainable profitability.

This is the first mission I have.

And I will stick to it based on a few things.

First, solid execution.

We need to focus clearly on solid execution, impeccable time to market, higher volume, and review of the cost situation, as you know.

2012 is clearly the year where we want to start to stabilize the Company and start the building, clearly.

That's the main objective that we have.

I strongly believe that we have the potential.

It would be really a pity not to reveal that potential.

Again, as I said before, we have the best modem technology on the market.

We are clearly in the top two, by far.

We have the best broad skill base in every technology we need in order to be one of the leaders of the platform market.

We have the best set of internal shareholders.

We have one shareholder who is one of the leaders in terms of silicon technology capable to provide us with proprietary, advanced technology that nobody has.

And we have the best -- the other shareholder is a leader of the infrastructure market, capable to feed us with important data on where the world is going and where the technologies are going.

So we need to make the best use of that in order to transform our potential into results and into profit.

Thank you for your attention, and looking forward to meet you or many of you in Barcelona next month.

Thank you.

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