President and CEO Carlo Bozotti commented, “In the fourth quarter, both revenue and gross margin results came in above the midpoint of our guidance despite the ongoing softness in the semiconductor market. We extended our leadership in key areas. Thanks to new product momentum, revenues from our wholly-owned businesses increased 0.2% and 1.6% on a sequential and year-ago basis driven by a very strong ramp of our MEMS products in the fourth quarter.

“Looking at 2012 overall, we improved our net financial position compared to 2011 despite the significant cash used by ST-Ericsson as well as the impact of weak business conditions. We were able to end the year with significant financial flexibility and strong cash balances while providing shareholders with the same level of dividend compared to 2011.

“Important decisions were made in 2012 that are shaping a new, more focused, higher-performing ST. In December, we announced our new strategic plan targeting leadership in two product segments: Sense & Power and Automotive Products and Embedded Processing Solutions. This new strategy includes a sharper focus on five growth drivers: MEMS and sensors, Smart Power, automotive products, microcontrollers, and application processors including digital consumer products. Importantly, from a financial model perspective, we are targeting an operating margin of 10% or more. A key component to achieving this objective is bringing our net operating expenses to an average quarterly rate in the range of $600 million to $650 million by the beginning of 2014.

“In connection with our strategic plan, we decided to exit ST-Ericsson after a transition period and our actions this past quarter, including the further impairment charge, are aligned with moving this decision forward.”

2012 Full Year Results

Net revenues for 2012 decreased 12.8% to $8.49 billion mainly due to lower unit volumes which were driven by a significant drop in sales at former largest customer and weaker market conditions.

Gross profit and gross margin decreased 22% to $2.78 billion and 390 basis points to 32.8% respectively. The principal components of the gross margin decrease were negative price effect and unused capacity charges of $172 million compared to $149 million in 2011, as well as a one-time $53 million charge to ST’s cost of sales due to an arbitration award recorded in the first quarter 2012, partially offset by positive currency effects.

ST’s income taxes for the full year 2012 in part reflected the write-off of ST-Ericsson deferred tax assets in the fourth quarter. Excluding the ST-Ericsson impact and certain discrete items, ST’s annual effective tax rate in 2012 would have been about 16%.

Net loss as reported was $1.16 billion in 2012, or $(1.31) per share. On an adjusted basis, net of related taxes, ST reported a non-U.S. GAAP net loss per share of $(0.33) excluding impairment, restructuring charges and one-time items. In 2011, net income was $650 million, or $0.72 diluted earnings per share, and on an adjusted basis was $0.41 non-GAAP diluted earnings per share.*

The effective average exchange rate for the Company was approximately $1.31 to €1.00 for 2012, compared to $1.37 to €1.00 for 2011.

Full Year Revenue and Operating Results by ST Product Segment

Further information can be found at www.st.com