STMicroelectronics N.V. (ADR) (NYSE:STM)

Long time Euro micro electronics player and apple supplier with strong innovation, cash, div and upside

7% dividend yield.

...riding the new technology boom

could be leader in new smart phone locations technology

This is a company that fits our portfolio criteria to a “t”. It is the global leader in MEMS, motion sensing chips that include gyroscopes, accelerometers, digital compasses, and inertial modules. It has well into a restructuring that began in 2008 that will result in higher margins and more efficient operations. They continue to reduce capital intensity in order to optimize opportunities between internal and external front-end production, reduce dependence on market cycles, and decrease the impact of depreciation on financial performance. They have reduced the capex-to-sales ratio from a historic average of 26% of sales during the period of 1995 through 2004, to approximately 8.6% of sales in the last three years.

One way to understand the importance of STM is to look at its patent portfolio . Almost one quarter of its employees work in R&D and product design and in 2010 the Company spent almost 23% of its revenue in R&D. Among the industry’s most innovative companies, ST owns around 20,000 patents and pending patent applications. Their top 10 customers are Apple, Bosch, Cisco/Scientific Atlanta, Continental, Hewlett-Packard, Nokia, Research in Motion, Samsung, Seagate, Sony, Ericsson. The challenges facing some of these customers explain the pessimism around STM’s share price. We think that whoever comes out ahead, STM is positioned to benefit.

The shares trade at an astounding P/E of 6.2, but if you take into account the restructuring charges at Ericsson, the P/E would be below 3. STM has almost half their market cap in cash and generates ¼ of their market cap in operating cash flow. They pay a 4.8% dividend and have a PEG ratio of .68 . If STM just meets growth estimates, which we think are low, the company is poised to return over 300% by 2018.

low PEG, strong price uptrend

Should see some improvements at ST with some of the moves they are making overseas to gain market share.

STMICRO WILL

BE THE NEXT

INTEL

SAYS

THE NEXT '' E. Casey.''

PROPHET

Specialty chip company that in its range of products doesn't seem to have a lot of competition. For example see in news that those blue colored parking meter boxes, ubiquitous in West Europe, are starting to replace the ancient coin "sticks" we have in the U.S. Practically every "plastic" card has an embedded STM chip: credit cards, mobile fone, etc, etc. Real net net is that the interventionist French government isn't going to let the company fail.

Solar is still sunny

I think we have seen the lows in the current cycle for semiconductors. Buy them now while everything seems gloomy and sell them in1-2 years when earnings will be just fabulous.

I'm not sure what percentage of their revenues are going to come from Wiis and iPhones (probably small), but the wild success of those two products bodes well for the MEMS market in general and this company in particular.

Makes the chips that sense motion in Apple's iPhone and Nintendo's Wii video game console.

DR pick

this company is prepared for a new surge in semiconductors sales

pumping all pedals, but no Mad Money word

decreasing market share esp in high end premium chips& high PE @ 23 compared to competitor Texas Instruments @ 12

it is comming out abought every week with an new inovation for didital semi componets

Vista will not bring the hoped for acceleration in the PC cycle. That in turn will mean an overhang in inventory all across the board.