May 3, 2007 – NXP Semiconductors posted disappointing 1Q07 results, with sales down 6.3% sequentially and 2.7% year-on-year to 1.115 billion euros (US $1.515 billion). Taking currency fluctuations and exited businesses into account (mainly DVD-R, and drivers for mobile and large displays), sales were 10.8% lower vs. 1Q06. Net loss widened to 266 million euros ($361.5 million), or 98 million euros ($133.2 million) minus costs associated with the recent acquisition of Silicon Labs, vs. a net loss of 17 million euros ($21.5 million) in 1Q06.

Sales growth in 1Q07 came from two business units: automotive and ID (+10.1%), and multimarket semiconductors (2.2%), while other units saw sales slide, primarily due to inventory corrections. “The market remained challenging in the first quarter, especially for our home and mobile and personal businesses,” noted company president/CEO Frans van Houten, in a statement. Sales in the company’s home segment were off 27% Y-Y with a 20M euro EBITA net loss.

NXP’s IC manufacturing operations tallied external sales of 32 million euros in 1Q07, down 35% from a year ago, and swung to a 69 million euro net loss (EBITA) vs. a small profit a year ago, much of which was due to restructuring charges for facilities in the Netherlands and Philippines. More charges relating to closures in the Philippines as well as Germany are expected to be recorded in 2Q07.

Gross margins fell about 18.7% Y-Y to 366 million ($497.4 million), to 32.8% margins vs. 36.0% margins, including some restructuring and “legal disentanglement costs.” Otherwise gross margins were only slightly lower, attributed to reduced utilization of manufacturing base (factory utilization in 1Q07 was 69%, vs. 82% in 1Q06).

Looking ahead, NXP said “the market remains weak” but seems to have bottomed out, so the company expects “flat to low single-digit sequential sales growth” for 2Q07, with short visibility due to current volatility in the industry.