STMicroelectronics NV (STM)’s first profit in 11 quarters, showing Europe’s largest semiconductor maker rebounding from its phone-chip troubles, was eclipsed by rivals’ more optimistic predictions for rising demand.

The chipmaker’s shares fell as much as 4.5 percent after its forecast for the current quarter lined up with analysts’ projections. In contrast, forecasts from Intel Corp. and Texas Instruments Inc. topped estimates, fueling expectations that the smartphone and personal-computer markets are picking up.

“It’s disappointing relative to peers,” said Janardan Menon, an analyst at Liberum Capital Ltd. in London. “ST’s quarter is broadly in line, but many companies in the sector are coming ahead of expectations.”

STMicro is reducing its reliance on the wireless business after shutting down its unprofitable phone-chip unit with Ericsson AB, focusing instead on the more lucrative power-management products, microcontrollers and sensors sold to the likes of Samsung Electronics Co. and Volkswagen AG. The shift is starting to pay off, with costs falling and margins recovering.

The company still faces challenges. Free cash flow was negative $99 million last quarter and the return to profit -- net income was $38 million -- was helped by $100 million of public funding as part of France’s project to aid the development of nanoelectronics technologies. Revenue fell 8.9 percent to $1.86 billion, Geneva-based STMicro said.

By: DocMemory
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