ST's first quarter net revenues decreased 8.0% on a sequential basis, within our guidance, with ST's wholly-owned businesses posting a sequential decrease of 3%, better than historical seasonality, while the Wireless product segment was lower by 29%. EMEA led all regions with 8.9% sequential growth while the Americas decreased by 4.5%, Japan & Korea down by 8.8% and Greater China & South Asia down by 16.7%.

Gross margin in the first quarter was 32.2%, excluding a one-time 260 basis point impact due to the charge on ST's cost of sales following an award from an arbitration tribunal ordering ST to pay approximately $59 million to NXP Semiconductors as announced on April 9, 2012. The first quarter gross margin was negatively impacted by an unsaturation charge of $71 million driven by inventory reduction and a severe deterioration of manufacturing performance due to a low level of loading and less favorable than expected product mix.

Combined SG&A and R&D expenses were $943 million compared to $894 million in the prior quarter mainly due to seasonality and reduced activity in the prior quarter. Combined operating expenses, as a percentage of sales, were 46.8% in the 2012 first quarter compared to 40.8% in the prior quarter.

Mainly due to increased losses at ST-Ericsson and excluding the one-time impact of the arbitration award, operating margin before impairment, restructuring and one-time items attributable to ST was negative 6.5% in the 2012 first quarter compared to about break-even in the prior quarter.*

In the first quarter of 2012, ST booked $159 million as a result attributable to non-controlling interests, which mainly included the 50% owned by Ericsson in the ST-Ericsson joint venture, as consolidated by ST. In the fourth quarter of 2011, the corresponding amount was $199 million.

First quarter net loss was $176 million or $(0.20) per share, compared to net loss of $(0.01) and net income of $0.19 per diluted share in the prior and year-ago quarters, respectively. On an adjusted basis, net of related taxes, ST reported non-U.S. GAAP net loss per share of $(0.14), excluding impairment and restructuring charges and the one-time impact of the arbitration award, in the first quarter, compared to net loss of $(0.01) and net income of $0.20 per diluted share in the prior and year-ago quarters, respectively.*

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^(*)Operating income before impairment, restructuring and one-time items, operating margin before impairment, restructuring and one-time items, operating margin before impairment, restructuring and one-time items attributable to ST and adjusted net earnings (loss) per share are non-U.S. GAAP measures. For additional information and a reconciliation to U.S. GAAP, please refer to Attachment A.

For the first quarter of 2012, the effective average exchange rate for the Company was approximately $1.33 to euro1.00 compared to $1.36 to euro1.00 for the fourth quarter of 2011 and $1.33 to euro1.00 for the first quarter of 2011.

Net Revenues by Market Segment / Channel