This outlook is based on an assumed effective currency exchange rate of approximately $1.40 = euro 1.00 for the 2008 fourth quarter, which reflects current exchange rate levels combined with the impact of existing hedging contracts. Additionally, this outlook includes the results of the ST-NXP Wireless joint venture for the full quarter, which began operations on August 2, 2008 but excludes an estimated $30 million cost in fourth quarter 2008 due to inventory step-up purchase accounting adjustment related to the former NXP Wireless business.
Recent Corporate Developments
-- On July 28, 2008, ST and NXP announced the closing of the deal bringing
together key wireless operations of both companies into ST-NXP Wireless,
a deal they announced on April 10, 2008. The joint venture, 80% owned by
ST, started operations on August 2, 2008 and launched as a solid
top-three industry player with a complete wireless product and
technology portfolio and as a leading supplier to major handset
manufacturers who together ship more than 80% of all handsets. ST-NXP
Wireless will be among the few companies with the R&D scale and
expertise to meet customer needs in 2G, 2.5G, 3G, multimedia,
connectivity and all future wireless technologies.
-- On August 20, 2008, ST and Ericsson announced an agreement to merge
Ericsson Mobile Platforms and ST-NXP Wireless into a joint venture. The
50/50 joint venture would have the industry's strongest product offering
in semiconductors and platforms for mobile applications and will be an
important supplier to Nokia, Samsung, Sony Ericsson, LG and Sharp. The
fabless joint venture would employ almost 8,000 people with pro-forma
2007 sales of $3.6 billion. ST is expected to exercise its option to buy
NXP's 20 percent of ST-NXP Wireless before the closing of this
transaction.
Q3 2008 Products, Technology and Design Wins
Automotive, Consumer, Computer and Telecom Infrastructure (ACCI) Product Highlights
-- In digital consumer, ST announced the sampling of the STi7105
high-definition (HD) video decoder, with enhancements for higher
performance, lower power, and lower bill-of-materials costs in set-top
boxes (STBs) and home media servers. ST also bolstered its leadership in
DVB-S2 digital satellite broadcast with a new 'front-end' STB chipset
for digital satellite HDTV equipment. The use of DVB-S2 by consumer
equipment manufacturers is increasing rapidly in a wide range of
applications, including Pay-TV and free-to-air STBs, integrated digital
TVs (iDTVs), PC TV cards and HD Blu-ray Disc equipment.
-- Also in STBs, ST announced that Proview will use the STi7101 HDTV
decoder in its new XPS-1000 set-top box, which employs the SBTVD digital
terrestrial standard, for deployment in Brazil. Additionally, ST started
production for two new IPTV STB designs in France and a new
standard-definition H.264 satellite STB for deployment in India.
-- In consumer audio, ST gained two design wins in Korea for its
SoundTerminal family of high-efficiency power ICs that integrate DSP
capabilities for flat-panel TV applications. The device is the latest in
the SoundTerminal family and integrates standard features along with the
industry-first inclusion of a dual-band dynamic-range compressor for
Hi-Fi audio and thin-TV loudspeaker protection.
-- In communications infrastructure applications, ST gained two design wins
for ASICs that will be used by a world-leading manufacturer in its
enterprise switching products. In computer applications, ST gained an
important design-win for a 65nm SoC for a second-generation enterprise
hard disk drive (HDD) from a major HDD maker. ST also won a socket in
the data-security environment from a leading manufacturer, based on the
Company's high-security solution for HDDs that meets the FIPS 140-2
level 3 standard. In addition, ST successfully demonstrated at IDF the
world's first MIPHY (Multi Interface PHY) Physical Layer interface for
the new 6Gbit/s Serial ATA (SATA) technology.
-- In automotive powertrain and safety applications, ST gained a design win
from a major Japanese player for an alternator platform. The first
application will be in Europe with other car makers expected to use it
in Q4 2008. ST also made strong gains in low- and mid-end powertrain
applications, supplying smart power ICs and microcontrollers (MCUs) to a
major Asian car maker for 1- and 2-cylinder vehicles for emerging Asian
markets, and to a major European car maker for 4-cylinder vehicles for
the Russian market.
-- In car-body applications, ST achieved a very important design win from a
key European tier-one supplier for smart-power products in power
management and external light control. Additionally, ST's market
introduction of next-generation 8- and 32-bit MCUs has led to numerous
design wins in many countries.
-- In car multimedia, ST gained a couple of key design wins for car-radio
kits. For the first, a leading European OEM chose an ST MCU, tuner IC,
audio processor and power amp, for a new after-market radio which has
been chosen by a car maker in China; the second kit was selected by a US
maker and includes audio processor and power amp, tuner IC and CD/MP3
decoder chip. Additionally, a leading automotive OEM in Europe selected
ST's STA2500D Bluetooth IC for use in Telematic platforms for two
leading car makers.
Industrial and Multi-Segment (IMS) Product Highlights
-- In microcontrollers, ST extended its library of functions supporting
vector control of electric motors using the 32-bit Cortex-M3 based STM32
MCU, which has already been designed into approximately 40 customer
motor-control applications.
