ST to 're-deploy' 1,000 engineers amid Q1 losses, CapEx cuts

The company, which is slashing its capital spending budget for 2005, also announced other cost-cutting measures, including a plan to migrate a portion of memory-wafer output to Asia. Moreover, it continues expense-reduction initiatives, such as the consolidation of certain general and administrative functions as well as the closure of several non-manufacturing sites.

In January,, STMicroelectronics said that it planned to take a $60 million impairment charge for scaling back its efforts in the DSL modem, cellular-phone chipset, and other non-strategic chip markets. It would also accelerate its cost reduction initiatives, including a plan to consolidate certain functions within the company.

The company has apparently made good on its promises in an effort to cut costs, including the re-deployment of a 1,000 engineers.

"With our significant R&D resources and deep talent pool, we believe our product objectives can be accomplished through better focus and by selectively reallocating research and development resources to higher priority product categories," said Carlo Bozotti, president and chief executive of STMicroelectronics (Geneva), in a statement on Tuesday.

"Therefore, in order to accelerate our R&D programs, we are redeploying approximately 1,000 engineers, representing 10 percent of ST's R&D workforce, from non-core programs, including FPGA and third-party design services, and from CPE modem and GSM chipset activities," he said.

As a result of the restructuring initiatives underway, the company incurred a higher-than-expected $78 million covering impairment, restructuring charges, and other related closure costs during the first quarter.

For the 2005 first quarter, the company reported an operating loss of $68 million, and a net loss of $31 million or minus $0.03 per diluted share. This compares to a profit of $77 million, or $0.08 per share, in the like period a year ago.

Net revenues for the first quarter were $2.083 billion, down 10.5 percent sequentially from the $2.328 billion reported in the prior quarter, and 2.6 percent above the $2.029 billion reported in last year's first quarter.

The company noted that revenue performance was at the lower end of its guidance range as somewhat stronger seasonal factors and price pressure impacted several of the company's application markets.

Bozotti painted a mixed picture in terms of the company's outlook. "We are beginning to see signs of improvement in certain segments of the marketplace: the first indications of increased order flow from the distribution market, as well as a pattern of strengthening in wireless. However, we still see strong price pressure in several markets, notably memory," he said.

"Looking ahead, with the present order visibility, we expect sales to grow sequentially in the range of minus 1 percent to 7 percent," he said. For 2005, the company reconfirmed capital spending plans of $1.5 billion, compared to $2.0 billion in 2004.