Tait Sorensen – Director, IR Carlo Bozotti – President and CEO Carlo Ferro – EVP and CFO Alain Dutheil – COO Carmelo Papa – EVP, Industrial & Multisegment Sector Philippe Lambinet – EVP and General Manager, Home Entertainment & Displays Group

Gunnar Plagge – Nomura Tristan Gerra – Robert Baird Sandeep Deshpande – JP Morgan Didier Scemama – RBS Jerome Ramel – Exane BNP Paribas Simon Schafer – Goldman Sachs Gareth Jenkins – UBS Glen Yeung – Citigroup Janardan Menon – Liberum Capital Adrien Bommelaer – Piper Jaffray

Good morning or good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the STMicroelectronics first quarter 2010 results conference call. As a reminder all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator instructions) At this time, I would like to turn the conference over to Mr. Tait Sorensen, Director, Investor Relations. Please go ahead, sir.

Thank you, Dino. Thank you for joining our first quarter 2010 conference call. Hosting the call today is Carlo Bozotti, ST's President and Chief Executive Officer. Joining him on the call are Alain Dutheil, Chief Operating Officer; Carlo Ferro, Chief Financial Officer; Carmelo Papa, Executive Vice President of the Industrial and Multisegment Sector; and Philippe Lambinet, Executive Vice President of Home Entertainment and Displays. This call is being broadcast live over the web and can be accessed through ST's Web site. A replay will be available shortly after the conclusion of this call. This call will include forward-looking statements that involve risk factors that could cause ST's results to differ materially from management's expectations and plans. We encourage you to review the Safe Harbor statement contained in the press release that was issued with the results last night and also in ST's most recent regulatory filings for a full description of these risk factors. As a reminder, please limit yourself to one question and a brief follow-up. And now, I'd like to turn the call over to Carlo Bozotti, ST's President and CEO. Carlo?

Well, thank you, Tait. Thank you for joining us on today’s call and for your interest in STMicroelectronics. We are pleased with the results for the first quarter. The numbers are in line with our expectations, are improving with a return to positive earnings and continued strong cash flow from operations. In the current environment, and we are working hard to start increasing the demand from our customers, and we are focusing on the very significant opportunity to improve the profitability of the company. Our product innovation is in full swing with among others key design wins in microcontrollers, MEMS, and ASIC, plus the new portfolio transition underway at ST-Ericsson. We are also seeing good momentum with customers, including our 19 new key accounts. Net revenues for the first quarter increased 40% thanks to IMS with 60% revenue growth, and ACCI with 47% growth in comparison to the year ago timeframe. These figures reflect both the significant rebound from the economic downturn as well as solid demand for our products. Regionally, the strongest results came out of greater China, South Asia and America, with 60% and 49% revenue growth respectively. Sequential our revenues were down 10% reflecting fewer days in the first quarter. Our financial performance reflects a significant turnaround in the bottom line results following the deep downturn of early 2009. Last year we focused on important strategic actions to reshape our product portfolio and improve the efficiency of our operations. As a result, we are very happy to have returned the company to profitability. We achieved net income of $57 million or 6% per share; despite the first quarter revenues are 20% lower than the Q3 2008 pro forma peak of the company, and the losses incurred by ST-Ericsson. Our earnings have improved substantially and we are focused on growing them substantially as we progress through this year. Mainly driven by the high fab loading, our first quarter gross margin of 37.7%, increased 1,140 basis points compared to the year ago quarter and 70 basis points sequentially. This sequential growth was in contrast to our historical seasonal decrease. As I mentioned on our last call, this is the first time since 2002 that our first quarter gross margin grew sequentially. Now let us turn to a review of our businesses. ACCI net revenues $909 million. Its 47% year-over-year growth was led by automotive, set-top box and computer peripherals products and reflected continued improvement in industry conditions. ACCI posted operating income of $48 million, representing an operating margin of 5.3%. In particular, the operating market segment grew an impressive 61% compared to the year ago quarter, and we believe we are gaining market share as we did last year according to iSuppli. IMS net revenues increased 60% year-over-year to $811 million, driven by strong growth in microcontrollers, analog and power discrete products and reflected solid growth in the multi-segment market and in distribution. IMS operating income increased to $92 million and its operating margin continued to expand to 11.3%. Turning to wireless, our net revenues in the first quarter increased 13% year-over-year to $587 million driven by the solid demand in Asia. Wireless operating loss in the first quarter was $116 million mitigated by the $72 million of income to reflect minority interest in the joint venture. Operating results were mainly due to lower revenues, but partially mitigated by the ongoing restructuring initiatives at ST-Ericsson. ST-Ericsson is focused on achieving the competitive cost structure, and at the same time it is progressively launching many new and leading-edge platforms. One of our key goals for 2010 is to obtain the value that we deserve from our products, particularly from our new products. As a result, we are seeing increasing ASPs in most of our product families thanks to the revenue from the new products growing as a percentage of the respective product family portfolio. Importantly, I think the results for the first quarter demonstrates where we are going in 2010. We want to increase market share, gain value from our product portfolio and move progressively towards our target return on net assets of 12% to 18%. We plan to continue to drive substantial improvement in revenue and earnings this year, accompanied by strong cash flow. Our (inaudible) the effort are now leading to many new product introductions, an important design wins with major companies across the market segment that we serve. To help you better understand our product portfolio; let me review just a few of the new design wins with you. In the area of MEMS, we have launched several new families of motion sensors for consumer and portable applications. Recent design wins include 3-axis accelerometers and 3-axis analog-output gyroscopes at several well-known portable consumer device manufacturers and 3-axis digital-output gyroscope for a next generation smart phone. We are seeing continued momentum for our MEMS products in leading consumer, mobile and gaming platform applications. In general purpose microcontrollers, ST recently announced several additions to its industry-leading 32-bit STM32 family, including a low cost MCU that brings the advantages of the family’s advanced ARM Cortex-M3 core to typical 16-bit applications. In automotive electronics, we gained important design wins for our 32-bit MCU at tier one OEMs in Europe and in the US. Also in the automotive, ST announced its 55-nanometer embedded-Flash process technology to be manufactured at our Crolles 300 mm fab, which will be used to implement next-generation automotive MCU chips. In powertrain applications, ST gained a significant share in a major worldwide engine-control management platform, covering all car segments. And in the safety applications, we achieved design wins from two leaders, in Europe and in the US, for radar-transceiver and baseband processors for medium- and long-range obstacle detection. We have introduced new extremely complex digital ASIC for computer peripherals and communication infrastructure. Here we recently won four major design wins, three of these are in 32 nm process technology, and they are among the first designs at that technology node. In addition, we unveiled four new members of our Sphere [ph] microprocessor family targeting embedded control applications across several market segments in computer, communications and industrial applications. In consumer applications we launched a number of set-top-box decoders, including our high-end STi7108, which enables 3D-ready hybrid Internet/broadcast-TV set-top-boxes to deliver broadcast, Internet and personal content on the TV. For digital TV, in growing markets such as China, India and Latin America we have introduced the STi7167. Also we gained a key display win for our DisplayPort-to-VGA convertor from a major tier-one OEM in the US for portable applications. In the area of advanced analog and smart-power and power we are introducing a large number of new products, including a class-G stereo headphone amplifier IC that achieves significantly higher efficiency than previous-generation devices and the world’s most integrated ultrasound pulse controller, enabling the next generation of ultrasound imaging systems. And in power conversion ICs, ST gained key design wins, including one from a major consumer manufacturer in Europe for a kit including three different DC-DC converters for a new 2011 TV platform, and another from a leading US game-console maker for voltage-regulator ICs. Finally, ST-Ericsson had several important product announcements during the quarter, which they will discuss in detail on their call today which follows ours. We are committed to serving our customers and making their demand requirements. In order to respond to customer demand, we are increasing our capacity in several key areas. The first is we're growing our 8 inch capacity in smart-power technology in Italy and 12-inch technology in advanced CMOS technology in France. Second, we are advancing the procurement of wafers from silicon foundries, and third our 6-inch power and analog facility in Singapore, where we are already running at about 15,000 wafer per day, is expected to increase capacity over the course of this year. We believe this is the biggest fab in terms of output in the world for analog and power. Our first quarter capital expenditures were $179 million. We had planned however to invest more, but were not able to do so due to longer lead times from semiconductor equipment suppliers. We will catch up in Q2, and of course our priority is to capture demand and to serve our customers. At the end of the first quarter, our net financial position was $566 million. Over the course of 2009, we improved our operating cash flow and increased our net financial position and we expect to continue to build upon these results in 2010. During the first quarter net operating cash flow was $176 million representing 7.6% of net revenues. Looking forward, we expect our net financial position to be strengthened through the monetization of our investment in Numonyx. Based on Micron’s current stock price, which is higher than when we announced the deal, the sale should represent about $900 million benefit to the capital structure. This figure is comprised of the value of the Micron share that ST will receive upon the completion of the transaction. The M6 facility, which we will receive at closing, and have already committed to our new photovoltaic initiative representing about $80 million in revenue, and the termination of our $225 million loan guarantee to Numonyx. While we cannot anticipate the timing, another important opportunity to announce our net financial position is that we are entitled to recover about $354 million from our legal action regarding the purchase of unauthorized auction rate securities by Credit Suisse. All in all, both our capital structure and net cash positions are very solid. Thanks to our solid financial foundation, earlier this week our supervisory board has recommended to shareholders an increase in our annual cash dividend to $0.28 from $0.12 last year. Based on our current share price, the proposed dividend represents a yield of about 2.7%. Turning now to our cost reduction efforts, the restructuring within the ST perimeter is substantially done, and we remain focused on improving our business fundamentals. The restructuring plans detailed by ST-Ericsson are well on track. We entered 2010 targeting about $300 million of additional annualized cost savings with respect to the fiscal year 2009 from ongoing and already announced plans. Approximately $280 million in savings still remain through completion, mainly from ST-Ericsson efforts. Looking ahead to the second quarter, based upon our backlog and other factors we expect sequential revenue growth of between 6% and 12%, led by double-digit growth at IMS and ACCI, and assuming flat quarter to quarter revenue as a result for ST-Ericsson. On a year-over-year basis this represents substantial growth of about 24% to 31%. Based upon the anticipated mix of revenue and the effective current rate of $1.38 to 1 euro, we expect our gross margin to improve to about 38%, plus to minus one percentage point. Our gross margin progression is limited by business mix evolution, with a decreasing portion of wireless as a percentage of total revenues in the second quarter. We expect an additional significant improvement in manufacturing cost for the second half of this year. Starting from a loss of $0.08 per share in the fourth quarter of 2009, we have returned to profitability and in the first quarter of 2010 we reported income of $0.06 per-share. As the current market momentum is stronger than expected we are committed to serve the robust demand of our customers, boosting our revenue growth and continuing to improve our net earnings through the next quarters. In summary, our results show that we are executing with discipline and determination. Our revenues and gross margin were in line with our outlook and even slightly better from a margin perspective. We have returned ST to profitability, and we are committed to continue to significantly improve net earnings as we move through 2010. Our net cash from operations was a very solid 7.6% of sales, and our net financial position and capital structure are also quite solid, leading to the board and management decision to increase returns to shareholders by raising the cash dividend. Now, I would be happy to take your questions. Thank you.

(Operator instructions) The first question is from Mr. Gunnar Plagge of Nomura. Please go ahead sir. Gunnar Plagge – Nomura: Yes, hello. Thanks for taking my question. If I take your Q2 guidance for top line and gross margin, and assume a small OpEx decline, and reconcile this on a divisional basis assuming a similar loss in wireless in Q2, I get quite high assumption for ACCI margins and IMS margins. So could you talk a little bit about what we can expect in Q2 for those divisions on their margin level?

Yes, of course, there will be substantial improvement both in IMS and ACCI. I believe that this is just the first step. The way that we see then the following quarters is with additional improvement, and in fact in Q3 we also expect significant improvement in ST-Ericsson. So I would like to ask Carlo Ferro to comment more in details on IMS progression and ACCI progression.

Thank you, Carlo. Good morning, good afternoon everybody. Thanks Gunnar for the question. Indeed the ACCI and IMS are really progressing on margin as anticipated entering the year. I'm sure that many of you were talking about the profitability of these two segments and the perspective of opportunity of the profitability. Entering the year, we have already shared the opportunity for them of continuous improvement. In ACCI – and also we were not anticipating a major step from Q4 into Q1 due to the phase dynamic and calendar impact on the sales dynamic, while we are very encouraged on the progression going forward. And ACCI at 5.3% is at the end below the peak where the group has been, the segment has been in the past. We still have very substantial opportunity of improvement for the automotive product group. We have computer, which already deliver double-digit operating margins and we have in the digital consumer division as you know the great opportunity as digital TV sales will ramp to the end of this year and beginning of next year. We are covering also this area, while set-top-box we already benefit from a very substantial profitability. So ACCI substantial opportunity to grow up from 5.3%, and as you well noted Gunnar the second quarter guidance already include some portion of this progress.

IMS in Q1 delivered 11.3%. We have already told in the past that this is below the 15%, 16% delivered in Q3 ’08 before the crisis by this segment. Continued opportunity with the product mix moving towards analog product. The contribution of new product [ph], but even very important the improvement from manufacturing our driver for IMS to improve operating margin next quarter and to continue to improve through there. So we are very comfortable on this dynamic, especially considering that manufacturing is contributing somehow from Q1 to Q2, but not so much. While we do expect for the second half of the year to have an acceleration in the improvement of our internal wafer cost and contribution of manufacturing to sales, as also capacity will somehow increase in our fabs.

Carlo Bozotti, one additional short comment on IMS. We expect IMS starting from Q2 and then in the following quarters to go above or substantially above our peak. In IMS our peak was $900 million in Q3 ’08 and the visibility of the new products and the effort that we are doing in this sector will give us this important opportunity. So we expect strong growth there. Gunnar Plagge – Nomura: :

This is Alain Dutheil speaking. In fact, you know of course wireless is using our manufacturing infrastructure. They are also using sub contractors, and also there is a change of mix in the wireless business. So as far as we are concerned we are not going to be impacted with the ramp up of our manufacturing. We are going to ramp up Crolles as planned. Gunnar Plagge – Nomura: Could you give us a number maybe where you see the ramp by the end of the year?

By the end of the year in Crolles we are going to move from 2700 wafer a week to 3200. Gunnar Plagge – Nomura: Thank you.

2700 was last year, and we're ramping up. And of course, we are expanding significantly the procurement from silicon foundry. But specifically on coal Crolles, these are the numbers, so we are increasing the capacity elsewhere. We are increasing our capacity in (inaudible) in our 8-inch fab mainly for BCB type of technology, and we are also increasing our capacity in Singapore. And this is concern also. Gunnar Plagge – Nomura: Thank you.

Thanks, Gunnar. We will move on to the next question, Dino.

The next question is from Mr. Tristan Gerra of Robert Baird. Please go ahead sir. Tristan Gerra – Robert Baird: Hi. Can you give us an update on the potential for a cash infusion at ST-Ericsson and also maybe give us a sense of the progress you see for your 45 nm base bumps there and timing of ramp?

Yes, I think we will comment on the first one in the – of course, our conference call is just before the conference call of ST-Ericsson. So, I think at the level of the products and the specific programs and the new platforms, the new solutions I would suggest that this is discussed during the conference call with ST-Ericsson. But Carlo, please comment on the financing of the venture?

Very quickly, (inaudible) to confirm that the intent of ST (inaudible) is to fully back a possible financial need of the joint venture. At the end, we do not foresee nor joint-venture management foresee any major cash shortage for the short-term. Free cash flow could be a positive. They have a reliable open facility on working capital management, and will eventually some bridge financing be required to (inaudible) with short-term credit facilities from parent. It is not requested nor is currently contemplated by the partner any further equity injection into the joint-venture. Tristan Gerra – Robert Baird: Okay, great. And a quick follow-up, if you could give us your utilization rates front end in Q1 and expectation for Q2?

Yes, sure. (inaudible), in Q1, our utilization rate was just below 90%, and by the way our 8-inch and 12-inch fab will ramp up, and in Q2 it is going to be slightly above 90%. So, again, usually when we are giving this number, this is compared to stand alone capacity, which is a kind of ideal situation in the 91% to 92% is the kind of maximum. Our 8-inch which will be also at the level. So, all our fabs will be above 90%. Of course this is not a limitation because at the same time in parallel, as I was saying before, we are increasing our capacity. Tristan Gerra – Robert Baird: Great. Thank you.

Thanks Tristan. Dino, we will take the next question.

The next question is from Mr. Sandeep Deshpande of JP Morgan. Please go ahead sir. Sandeep Deshpande – JP Morgan: Hi, thanks for taking my question. Just a quick question on the gross margin guidance into the next quarter. I mean, you are saying 38% plus/minus 1%. I mean, given – giving very strong indications on ACCI and IMS on the margins and also the currency, which has moved in your favor, the full-year 30 basis-point move in the gross margin, given the level of leverage you will have at these 90% utilization seems pretty low. So is this just because you want to be cautious, or is this an ST-Ericsson impact on the gross margin?

Well, I think of course this is – we expect progressive improvement quarter after quarter, and I think we have already mentioned that we expect very significant improvement from our manufacturing machine in the second half of this year. This is going to be material. I think Carlo, if you can elaborate here and describe. It is clear, however, this is just another step in the right direction somehow mitigated by the mix, but the potential is of course to progressively improve quarter after quarter. Carlo, please.

Yes, Carlo. First of all, I will say that the gross margin for Q4 as we see today is totally in line with our initial plan.

42, sorry, 42.

What eventually we have done a little bit better than expectation during the first quarter, of course somehow mitigate the sequential progress from Q3. Q1 into Q2, however, from Q4 into Q2 we expect one full point of improvement in the gross margin. The reason for that with respect to the positive dynamic of manufacturing to the positive dynamics of product mix with introduction of new product, basically all the product groups is that of course the raise of sales in wireless and total sales play a substantial role in the factor of our gross margin. So, as Carlo anticipated next quarter we expect revenues to grow double-digit for ACCI and IMS, but substantially remaining flat on wireless, and of course the change in the mix between the three segments has a short-term impact on the gross margin. Sandeep Deshpande – JP Morgan: Sorry, one follow up question on your – on the wireless business itself, you did talk about supporting the wireless business. Are there any other actions that need to be taken, given that the wireless business is now actually hurting your overall top-line and bottom-line performance at a pretty good point in the cycle?

Well, I think first of all the first comment is, we all know, I think you know that indeed this is a good moment in the cycle, but there are from a customer point of view performance that are not the same everywhere from a geographical point of view. So this is a transition year for ST-Ericsson. As you know the transition is to move from a business model that is more – that was more focused and concentrated on ASIC into a business model that will be mainly driven by platforms and solutions. So this is one reason. And the second reason is the restructuring, (inaudible) – I think it is now time for us to focus on fundamentals, and this is what we will aggressively do quarter after quarter. In ST-Ericsson, the restructuring opportunity are still very significant. In fact, overall they still need to complete restructuring with potential benefits in the range of $250 million. I believe the potential is great. The base of IPs, the new products, the customer endorsement is there. It will take some time, but it will be done. I mean it is not the first time that we went through some important strategic initiative in ST. I just want to mention Numonyx again. This quarter, or next quarter depending on the final closing date we will significantly enjoy because of courses this is very material to improve our net financial position. We were committed on that. We went through and we will do the same with wireless, of course on a completely different angle because we are committed. And this is an important strategic initiative. All the underlying value is very, very important. This is a transition phase from a product point of view. It still is in terms of restructuring, but the potential is great. We are very committed and we will succeed. Sandeep Deshpande – JP Morgan: Okay, thank you.

Thanks Sandeep. Dino, we will move on to the next question.

The next question is from Mr. Didier Scemama of RBS. Please go ahead sir. Didier Scemama – RBS: Hi, good afternoon gentlemen. Many thanks for taking my questions. I'd just like to basically ask you a question regarding the depreciation and the impact of consolidating M6 back on your gross margin basically, going forward. And I also have a follow-up; thank you.

Yes, Carlo will take this.

Yes, the depreciation for Q1 are $251 million. This is R&D only. Then we have about 50 million of amortization on top of that. For the full year we expect depreciation in the range of 1.1 billion at current exchange rates, and amortization of about additional $200 million. Didier Scemama – RBS: Right, because basically, if I take into account those comments, it seems like your gross margin excluding depreciation was kind of flattish sequentially in the first quarter, despite a very high level of utilization rates and probably some positive pricing. And also if I take into account the midpoint of your guidance for Q2, it feels like your gross margins are in fact slightly down sequentially excluding depreciation, again despite positive impact of pricing, utilization rates and, in fact, a strong tail wind from FX. So if you could just help me reconciling the gross margin guidance, which is a bit puzzling, really?

Yes, Didier maybe off call we can of course expand many detail, and I am sorry to have to introduce again the complexity with ST on the accounting calendar, which in Q1 is 10% shorter than Q4. So when you compare depreciation Q1 to Q4, most of the reduction exactly follows the difference in calendar, but also revenues have followed the difference in calendar. I guess this is the high-level answer to your question, and of course I will be happy of how they respond [ph]. Didier Scemama – RBS: And for Q2?

For Q2 we expect…

The depreciation for Q2. Didier Scemama – RBS: Yes.

We expect similar to prior quarter. Didier Scemama – RBS: And just a question on the cost base because, obviously, the positive impact of the FX is yet to come in the P&L. Would you expect, therefore, that your actual OpEx sort of stabilize where they are here or even come down going forward?

I would say that the impact of the exchange rate is obviously materializing progressively as reflecting our hedging policy in prior period that has very much mitigated, the effect of the increase of the exchange rate short-term and of course now we are nearing on the same effect on the other side. So you may note from the press release that effective exchange rate for Q1 has been 1.39, and our Q2 forecast is based on 1.38, which implies an average rate from now through the end of the quarter of 1.34. So maybe where we stand today is slightly better than that. But at the end of the day, exchange rate is not big a gain when moving from Q1 into the second quarter. Obviously, as we will move forward in the second half of the year if exchange-rate remains at this level or eventually even improve, we will take higher advantage since in Q3 we have so far hedged a portion of the expenses but not the full target portion and for Q4 even a lower portion. Didier Scemama – RBS: Wonderful. And just the quick last question, Carlo, you are going to have post I think, quite clearly, a very clever sale of Numonyx to Micron as well as the future settlement with Credit Suisse. You are going to have maybe close to $2 billion of cash, maybe just short of that, by the end of this year. So you are one of the few companies in the sector to pay a fat dividend, but still a modest dividend in comparison to other sectors. What are you going to do with all this money?

Well, first of all I think today really the focus is on fundamentals. Fundamentals is well you mentioned expenses. Still we are 20% below our peak. This is a great opportunity for ST, because we will go back to the peak and our expenses substantially will either decrease or not increase. So this is a great opportunity to reduce the expense to sales just to mention one, with the savings for the new products et cetera. Today, what we want to do of course is to move on with our you know focus on fundamentals. We do not have as I already commented in January; I think we do not have at this moment any important initiative on the plate. We want to digest what we have done, and the focus will be on fundamentals. We have decided to increase the dividend. I think it's a significant increase. I think we're moving from $0.12 last year to $0.28 this year. It is not yet at the level that we had before the crisis. But of course this is an opportunity than for future years. But again the focus today is on fundamentals, and we want to reinforce our net financial position, and then of course we will see with time, but today priority is to digest what we have done, to go back to run rate [ph] between 12% and 18%, we can do we'll do. Didier Scemama – RBS: All right. Well done. Thank you.

Thank you, Didier. Dino, we will move on to the next question.

The next question is from Mr. Jerome Ramel of Exane BNP Paribas. Please go ahead sir. Jerome Ramel – Exane BNP Paribas: Yes, good afternoon. Got a question, with the capacity constraint you mentioned, I'd just like to understand how the relationship with your customers – if that gives you more visibility, and what is your current visibility? Where are the lead times, and what is the pricing today? So if anything has changed over the last couple of months, or if it's still the business as usual?

Yes, I think I will take the, you know, the point on the customers and Alain will get more in the details on the capacity on what we are doing. Today I think overall in the industry what we are seeing for sure is not only for ST. I think is somehow global. Our customers are asking more. I have to say that of course we are in contact with many, many customers and we are in contact also with many of the customers of our customers. So the demand is robust and we are increasing capacity. I think this will progressively happen during the course of this year. I think of course this is in the frame of what we already have, but this is an important flexibility that we have in the company. We can grow our capacity everywhere. We can mitigate CapEx in all the blocks that we can control, but I would like Alain to describe what we are doing, you know, in the 12-inch and the 8-inch et cetera.

Yes, as I was mentioning before, while of course our utilization rate is pretty high. We are increasing our capacity. We are increasing our capacity not only in front-end, but also in backend and in testing, which is quite important, and by the way we would have liked to spend more in CapEx in the first quarter and in the second quarter, but the lead times are increasing. So we are pushing our supplier to get more equipment. So what we are doing in our front end is number one I mentioned Crolles. We are increasing our capacity this year to 3200 and we move progressively to 3600, and little bit more if needed. I mentioned 8-inch fab and this is mainly our Agrate fab, where we are increasing our capacity in the BCD, in the technology of the BCD which are by way very important for the automotive customer. And here we are doing it by moving some equipment from the US to this fab, but no only to get some new equipment, and we are increasing also our 6-inch capacity in Singapore. And by the same token we are also increasing as I was saying before our capacity in testing, and here we have a pretty good visibility of what is the need of our customer, on account of quite good visibility and I think it's important also to ramp up our capacity in testing in our back end fab, as well as assembly capacity that we are also increasing. On top of that we are also asking more from our subcontractor, and we are getting not as much as we would like but we are also increasing our manufacturing now. Jerome Ramel – Exane BNP Paribas: But does this mean that you've got visibility until the end of this year? Because, if we take into account the ramp up, it would probably take a quarter. So does it mean that your customers are currently giving you visibility until the end of this year?

No, we have started already to add other equipment and to put some equipment in France and to ramp up the capacity. By the way, during the first quarter what we had to do in our 8-inch and 12-inch is to make sure that fab we are producing at the maximum capacity. You remember that we had to decrease our headcount in Rousset, and now we are doing up to the first quarter we are increasing the capacity. Now it's done, it's going to be done fully in Q2, utilization rate, and we are responding to our customer. We are not responding to our customer as much as we would like but at least we are doing our best.

Yes, and of course this progressive I think if you look at the volume per day in Q1 it is already better than Q4. There would be a significant increase in Q2 and then a significant increase in Q3. Today we have a pretty solid visibility from our customers of course for Q3, and we expect you know, of course to achieve what we said on the guidance for the sales in Q2, but we expect another significant step than in Q3. Jerome Ramel – Exane BNP Paribas: Okay. Thank you.

Thanks, Jerome. Next question Dino.

The next question is from Mr. Simon Schafer of Goldman Sachs. Please go ahead sir. Simon Schafer – Goldman Sachs: Yes, thanks so much. I was hoping you can make some more qualitative comments maybe about just the state of the channel. Carlo, you referred to the observation that some of your divisional sales are pretty close to previous peak levels or, in fact, in some cases potentially exceeding because of some new product growth areas. But I think at the end of Q1 you had already basically said you yourself felt that there was some degree of double ordering happening. So perhaps you could just comment as to what you're seeing in the channel in terms of inventory build and other lead times along the different areas. That would be very helpful.

Well, I have to say that at the end of Q1 possibly I was too pessimistic; excuse me at the beginning of Q1 in January when we met, when we met in Paris. I think today talking to our customers, but as I said also talking to the customers, our customers, we do not have any evidence of buildup of inventory. We track regularly and continuously of course, for instance the inventory at our distributors, the POS is increasing, so the point of sales, the revenues of our distributors are increasing and our inventory at our distributors is not increasing at all. In fact, it's pretty low and I believe we do not have real evidence of any buildup of inventory in any place. So my comment one quarter ago was a concern, and I think today I have to say that I am optimistic because the visibility that we have Q2 and for Q3 is pretty solid. Simon Schafer – Goldman Sachs: Understand. And what does that mean in terms of your own lead times? I understand, obviously, you are trying to add capacity and there is perhaps some supply-side constraints in your own ability to add capacity, but what about lead times for your own products, your own customers?

Well, I think Carmelo will take this and maybe before we go to the lead time, you said that you're already back at the peak, we are not yet back at the peak, and this is an important element because you know, in Q1 we were still about 20% below our peak and even in IMS in Q1 I think we have done $811 million, right. We were – the peak in IMS was $900 million. So – and of course we got back to the peak and this is a great opportunity, because for us going back to the peak is of course a dramatic improvement in the earnings per share. But please Carmelo comment on the lead times of your products.

Well, the lead times unfortunately are against us. We are building the capacity fortunately but right now, though we are aggressive in manufacturing, improving yields, improving the efficiency of the manufacturing machine after the heavy disaster last year, we still have room to grow. And therefore the lead times are not totally what we would like them to be. So they are stretching out. The demand is continually growing by each region without any discrimination. Last year was just Asia, the very beginning of the ramp up. Now it's Europe, it’s America, it's everywhere. So we have new products coming up. For instance, there is a tremendous opportunity for the gyroscope or MEMS that in Q2 we’ll have a significant impact very visible and this will grow. It’s a pervasiveness that is similar to what was happening before for gyroscope, three years or two years ago and last year. So we are very confident. As Carlo was saying, there is no buildup in inventory over the small or big OEMs. So everything is in our favor, at least for next quarter and for Q3. Simon Schafer – Goldman Sachs: Understood. Thank you. My follow up question would be, and I'm sorry I have to ask on this again, but just as it relates to the gross margin outlook, I guess one way to perhaps follow on is to just ask by how much your cost of goods sold are perhaps increasing because of this added requirement in terms of capacity. So by how much is the capacity base growing? So I guess, again, how much is depreciation really impacting cost of goods sold, by which token then you aren't seeing as much gross margin leverage as perhaps we would have expected, given the product mix shift and utilization rate increase and so on?

Well, I think – Carlo would maybe detail better, but I think we are good on moving from Q4 to Q1. The growth is more I think moving from Q1 to Q2 and this is really mix because – Simon Schafer – Goldman Sachs: But your mix was favorable in Q2.

No, the mix is you know, we are selling – wireless is going to be flat, and we are for instance growing significantly our discrete business. So I think from, you know, gross margin point of view this is not favorable mix because we would be selling – discrete is a good business you know, I think it's a good earnings per share, is a good profitability on discrete, but this is not the same level of gross margin that we have on wireless. So while I have absolutely nothing against our discrete business because the yield in terms of profitability is very good. I think in terms of gross margin is not the same level as wireless, for instance, and this is why our mix somehow is impacting Q2. However, in Q3, I think first of all there would be a very significant manufacturing improvement, manufacturing performance improvement in the second half, and then wireless, we’ll get back with stronger sales, and therefore we are confident on the progress of the gross margin performance quarter after quarter. Simon Schafer – Goldman Sachs: Okay. Thank you very much.

Thank you.

Next question Dino.

The next question is from Mr. Gareth Jenkins of UBS. Please go ahead sir. Gareth Jenkins – UBS: Thanks. A couple of very quick ones if I could, I just wondered, product by product – I know it's a wide question – but whether you are seeing any upward pricing pressure and, if so, in which particular areas. And then, just secondly, on further restructuring, and then any cost savings that you see going forward over and above what you've already announced, as we go forward into 2011. And then, finally, on the M&A outlook you've been pretty aggressive in terms of getting the wireless business together. Is there anything further that you see in terms of corporate cleanup post Numonyx that…

Well, I think on the prices Carmelo will comment, of course we have opportunities today. Carmelo please and also Philippe.

Talking on prices is always a difficult matter, because it is not easy with customers. They are used to what was happening last year and therefore we have a different angle [ph] today, but we are deploying internally a strong program to increase prices wherever it is possible, and of course this is, you need to understand they are big accounts, by no way you can be increasing the price unless you renew a contract, you can discuss on a different level of, different degree of freedom. But there are distributors where we can do this. So overall, I can say that the impact on the price decrease would be much, much less as they used to be before at least for semi products. So this is one fact. And therefore again we feel positive about this.

I think regarding ACCI, this is Philippe Lambinet speaking. Regarding ACCI, clearly we follow the same approach. I mean, the long-term contracts are protected, however, upsides and shorter term businesses we do have an opportunity to increase prices, and so we're doing that selectively, and definitely this will have a good impact in the quarters to come.

Yes, Carlo.

Yes, maybe I take the question on restructuring again. We said in January that we still have three initiatives ongoing. The Crolles phase 2 for ST-Ericsson, the Crolles phase 3 for ST-Ericsson, and the completion of the manufacturing in ST, which is mostly the phase-out of the 8-inch fab in Phoenix. I will say that the ST-Ericsson press release should be very helpful on guiding on this respect since they are very clear, out of $230 million of target savings for phase 2 at the end of March. They have achieved about half. So $150 million remains from end of March through completion, while phase 2 has not started yet, and will mostly affect on the second half of the year, which is another $150 million savings. So this drop to $230 million from end of March through completion of the plan, and as obviously a substantial improvement progress in Q1 has occurred in the course of the quarter, when comparing to the cost structure of Q1, you may consider few things of addition 1 million on an annualized basis because of this effect. On top of that we have our initiate in Phoenix and overall the opportunities add up to about $280 million annualized from Q1 income statement to the completion of the plan that Carlo mentioned in his introductory remarks.

Yes, and then the last question was on M&A. I think again that priority this year is two. One is to increase the earning per share and the second one is of course is to increase EBITDA. I think we want to focus on fundamentals, and we need to digest and make sure that the wireless initiative is successful. As I said, we have all the ingredients to be successful there. This is a transition year, but it is a big effort in R&D to introduce new products, particularly, of course for the smart phones, and also for in general the high end modern solutions, including LTE. So priority is on the fundamentals and the priority is to succeed in what we are doing with Ericsson on the wireless joint venture. Gareth Jenkins – UBS: Thanks.

Thanks Gareth. Dino, we will move to the next question.

The next question is from Mr. Glen Yeung of Citigroup. Please go ahead sir. Glen Yeung – Citigroup: Thanks for taking my question, are you able to compare your 8-inch wafer capacity that you expect to achieve when you are done all your capacity additions to where you were in 2008?

Yes, of course. We are able to compare. I think it's even more important to compare Q4 2009 with Q4 2010, and I think maybe on a separate call we can detail the comparison also with 2008, but I have clearly in my mind what is the progression moving from 2009, from the end of 2009 to the end of 2010, and this is a very material growth, and I have to say this is a very material growth with a very mitigated CapEx. And this is an excellent opportunity for us, and this is of course particularly on smart-power technologies, not exclusively, is also on embedded script [ph] and embedded flash technologies, but it is very material. Of course I cannot provide the number. I think as I said before it is progressing quarter after quarter, but there is plenty of wafers, and the good point for us is limited capital investment. I think I want to underline these because together with this growth in the volume in the 8-inch facility, we will enjoy significant cost reduction, but this is an important opportunity, and we are really jumping on this opportunity. Glen Yeung – Citigroup: I guess what I was just trying to understand, though, was whether or not there was a material decline in wafers in 2009, so that I clearly understand that from '09 to 2010 you are going to grow. I'm just trying to understand if your 2010 wafers will be above where you were in 2008?

No, but this is not what I said. I compare Q4 2009 and as you know, in Q4 2009, we were at fab utilization of about I think Alain correct me of about 85%. So I'm not comparing 2010 with 2009. This of course as a comparison will not make any sense because in the first half of 2009 our loading was extremely low. I am comparing Q4 2009 where the loading was not optimal, but was already at 85%, and I am comparing this number with Q4 2010, and as I said of course this is happening progressively quarter after quarter, and this is very material. So if we would compare you know, 2010 with 2009, it would not make any sense, but I think is a very, you know, important opportunity because 2009 was already at a good level of loading. Glen Yeung – Citigroup: (inaudible). Go ahead.

In any event, the IR team would touch the base with you and share the information on Q3 ’08, unfortunately we don’t have that handy, sorry for that. Glen Yeung – Citigroup: Oh no, understood, thank you; I'll follow up offline. The other question I have is a bit of an oddball one. I just wanted to get any feel you have for other income guidance for the quarter and for the year?

You know, Q1 normally is a quarter a little bit weaker because of this seasonality of grants that are somehow higher towards the end of the year and lower in the beginning of the year, when government still somehow protective of the early budget for this season. So what we currently see for other income and expenses, and I would suggest to considering the model is $20 million plus or minus a few million for each of the following quarter. Overall, we are quite confident that the R&D funding in the year may materialize above $100 million as expected and overall the line other income and expenses for the year could be a net income in a range of $70 million to $80 million. Of course, this does not include any gain from the divestiture of Numonyx that eventually make the gain. A totally different much higher number. Glen Yeung – Citigroup: And then one last quick one is, you did very well to manage your inventories in the March quarter. What is your expectation for your own inventories in the June quarter?

Carlo.

Well, we do at the end of course continue to manage our operations in order to serve the customers and meet increasing demand, and meeting our 4.5 to 5 turns target on inventories. Overall, on this basis we do expect in the second quarter, inventory turns may improve from that 4.6 million of the prior quarter reflecting an overall situation, whereby inventories in work in progress eventually increase, and it is needed to serve the demand while we are continuing to decrease inventories and finished products. Glen Yeung – Citigroup: Perfect. Thanks so much.

Thanks Glen. We will move on to the next question.

The next question is from Mr. Janardan Menon of Liberum Capital. Please go ahead sir. Janardan Menon – Liberum Capital: Yes, hi. Thanks for taking the question. You've mentioned quite a few times that you will see a very significant improvement in your manufacturing machine in the second half of the year. I was just wondering can you just elaborate what exactly this significant improvement entails. Is it a rise in capacity utilization from the current sort of north of 90% to around 92%, or is there something else which is going to come in, in a significant manner? And just as a follow-up, your computer sales was relatively weak, down about 21% quarter-on-quarter in what was a very strong quarter for PC-related companies. I'm just wondering what are the dynamics which are causing that weakness coming through in your computer sales, is it loss of market share in disk drives? Is that something that can continue, or is there something else which is working there?

Well, I think I would take, I would take the question on manufacturing and then we will comment on computer. So, as far as manufacturing is concerned, I think there are various ingredients. First of all, you know, last year for our manufacturing machine was really a difficult year. The disruption was tremendous, and I think finally Q2 will be the first, you know, very good quarter in terms of, you know, loading in terms of also running with the proper needs, running with an optimal situation in our fab, and as you know, because we have the stock turn that is, you know, rolling now is above you know, at the level of 4.6, but a significant portion of the advantage that we have in the manufacturing machine in Q2 with hit the cost of goods sold in Q3 this year. So I think the optimal loading and the fact that we can move into a more controlled mix is an important factor. The second is of course the learning curve and the progress in terms of productivity, in terms of equipment utilization. So this also explains of course the continuous improvement in the yield. This is important, is the second important block. And there is then another block that is significant is the rolling off of certain blocks of depreciation in the course of the second half of this year. Now if we move into back end, for instance, there is an important program in the company. We are buying a lot of gold you know, and we are progressively moving gold wires into copper wires, and this is another important program that we have. So these are the main elements of the improvement, I think is optimal loading but also optimal mix is the continuous improvement process in terms of yield, productivity, equipment utilization, the reduction of the depreciation in the second half, and in the back end the strong drive on saving on material, particularly replacing gold wires with copper wires. Now as far as computer peripheral is concerned, I think that Philippe will take it.

Yes. I just want to remind you that computer segment was extremely strong in Q3, Q4. So the Q1 performance you mentioned, basically reflects a bit of seasonality, a bit of course, due to the number of days in Q1. But we don't believe it reflects the loss of market share. I think it is just – we could not continue on the extremely, extremely strong performance we had an Q3, Q4. But at the end of the day, we will recover that situation, and we will see a more normal pattern in the coming quarters. But we don't expect the loss of market share in that segment. Janardan Menon – Liberum Capital: Okay. Thank you very much.

Thanks, Janardan. I think at this point we will move to one more question.

The next question is from Mr. Adrien Bommelaer of Piper Jaffray. Please go ahead sir. Adrien Bommelaer – Piper Jaffray: Hi, gentlemen. I just wanted to come back to your operating expenses. I think you seem to be implying that OpEx would come down by another about $200 million or more. Could you give us a little bit more color on how OpEx is actually going to come down by quarter, Q2, Q3 and Q4? I see you are down by about $30 million in Q1, I think, we are still pretty far from the levels you promised last year. So I just wanted to know when that materializes by quarter. And then I have a quick follow-up.

I will say that the end has really most of the expenses dynamic driven. The restructuring initiative is now under ST-Ericsson would you have please the patience of waiting an half an hour, I am sure that in half an hour you can ask the question directly to ST-Ericsson, and yes, of course it will be easier in our protocol of overall communication. Now on my side, I would eventually readdress in respect to the second quarter the dynamic from Q1 and Q2 for operating expenses and really we do expect from Q1 to Q2 to benefit from a very substantial improvement in the overall OpEx to sales ratio. Adrien Bommelaer – Piper Jaffray: And just as a quick follow-up, I was actually wondering more in terms of a business portfolio if you had any views on splitting up the company. I think, if you look at your three businesses, IMS, wireless and ACCI, each of them could be independent companies. And I was just wondering if you were very committed to keeping those three together and if you thought there were real synergies between the three. Thank you.

Well, now, I think we do not have any plan to split the company. I think I just want to mention one important element of synergy that is in between the consumer and the wireless is the new generation of applications processors. This is of course a very important product, and it will be the same configuration, the same structure that we are going to use both for set-top box and digital TV on one side and on the smart phones on the other side. This is just an example of important synergies. There is a new generation of application processor, and of course there will be you know, one platform here being developed in cooperation between the two entities. This is just one element to say that there is a value in offer to the company and the same comment I can do on the technology, for instance. So we do not have any plan to split. Adrien Bommelaer – Piper Jaffray: Great. Thank you very much.

Thanks, Adrien. And I think at this time we will close the conference call and we will let Carlo close.

Yes, I would like to close with a few comments on the progress that we have done in the course of the first quarter in terms of design wins, I think was a particularly good quarter in various areas. I think it was very, very significant win in the area of the new gyroscopes for MEMS. This is a very important opportunity for us, very short-term starting from Q2, and is of course, for portable computer applications is a new family, and this will start paying off very soon. Another important win that I would like to mention is in the area of ASICs, both for computer peripherals and communication infrastructure. And these are very important wins covering the two market segments, and in the area of communication infrastructure, I think we started with the new generation of 32 nm technology that of course is the very high-end. So they are very complex products and we are very pleased to see endorsements from major customers on these high-end products. And finally, I would like to mention also our microcontroller design wins, both for industrial and for automotive. Of course, the timeframe of the return is different in the sense that in industrial the return is shorter term, while in the automotive is more medium and long term. But these are very important design wins. So we have a lot of recognition from our customers in terms of new product endorsements and many of these things are very much on the high end.

So with that, Dino, we will go ahead and close down the call.

Ladies and gentlemen, the conference has now concluded and you may disconnect your telephones. Thank you for joining us today and have a pleasant day. Goodbye.