2011 Full Year Review

Net revenues for the full year 2011 decreased 5.9% to $9.73 billion from $10.35 billion in the prior year reflecting weak market conditions, particularly in the second half of the year, and ST-Ericsson's transition from legacy to new products. ST wholly-owned businesses' net revenues increased about 1% in 2011.

In 2011, AMM grew within the frame of a strong slowdown in the semiconductor industry recorded in the second half of 2011, while both ACCI and PDP decreased. AMM's net revenues, mainly driven by strong growth in MEMS, increased 7.5%, accompanied by an increase in its operating margin to 20.3% from 18.8% in 2010. ACCI's net revenues decreased 1.4%, strong growth in Automotive and Imaging being offset by weak market conditions, particularly in Consumer, throughout the year, as well as the planned exit from hard disk drive system-on-chip and its operating margin decreased to 8.9% compared to 10.0% in 2010. PDP's net revenues decreased 6% and its operating margin was 11.2%, compared to 13.6% in 2010 due to weak industry conditions as well as a specific situation at one customer. Wireless revenues decreased 30% and the operating loss increased by approximately 68%.

Gross margin was 36.7% of net revenues for the full year 2011, compared to 38.8% of net revenues in 2010, mainly due to prices and lower fab loading and unused capacity charges incurred in the 2011 third and fourth quarters. Operating expenses were about flat. Net income, as reported, was $650 million in 2011, or $0.72 diluted per share, mainly due to the after-tax gain of $308 million related to the cash payment from Credit Suisse as the full and final settlement of all outstanding litigation concerning auction-rate securities, compared to net income of $830 million, or $0.92 diluted per share in 2010. On an adjusted basis, net of related taxes, ST reported non-U.S. GAAP diluted net earnings per share of $0.41 in 2011 compared to $0.75 per share in 2010.*

On a year-over-year basis, the effective average exchange rate for the Company was approximately $1.37 to euro 1.00 for 2011, compared to $1.36 to euro 1.00 for 2010.

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(*)Net financial position, RONA attributable to ST and adjusted net earnings per share are non-U.S. GAAP measures. For additional information, please refer to Attachment A.

2011 Full Year Revenue and Operating Results by Product Segment