STMicroelectronics N.V. (EPA:STMPA)

Earnings Call: Q4 2013

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Jan 28, 2014

Thank you very much for joining us today for our Q4 and full year 2013 results presentation here in Paris, France. Hosting our event today, of course, is our CEO, Carlo Bozotti. I would like to start off with just the main presentation slide. You can see the schedule. We will have three executive presenters today, which hopefully will give you all the information that you will need. We will have a Q&A session as well, and then also a lunch with plenty of time to interact and get any additional questions you may have. We will try and honor our time commitments. This presentation is being broadcast live over the web and can be accessed through ST's website. A replay will be available shortly after the conclusion of the event. This presentation 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 last night, and also ST's most recent regulatory filings for a full description of these risk factors. In addition, today's presentation, we will host our usual investor call at 3:00 P.M. CET time today for those that were also unable to attend. It is now my pleasure to invite Carlo Ferro, Chief Financial Officer, Executive Vice President, Finance, Infrastructure, Legal, and Services. I messed that up, to speak about ST's Q4 and full-year results, business, and financial performance. Thank you, Carlo. Working. Thank you, Tait. Good morning, everyone. Good morning, also to all the participants to this event by webcast. Welcome to the STMicroelectronics year-end conference. Also, I have to thank those that put a step here for recognizing I am less tall as Tait is. Thank you. Thank you very much to the organizers. In my presentation, I would like to give you some introduction on the business, on the company organization, to discuss the financial performance for 2013, and to see and to brief on where we stand in the execution of our financial model. Many of you are familiar with the company. Let me just give you a quick overview. ST is a global leader in semiconductor, with over $8 billion revenues generated in all the main regions. About 60% of our sales are shipped to Asia, but U.S.A. and Europe, I would say Europe and the U.S.A., are the largest contributors to the design activity for the company. We are the largest European semiconductor company, encompassing all the capabilities from conceiving a product to delivering the product to the customer. This is thanks to a very substantial effort in research and development. We leverage on world-class technologies and leveraging on a unique know-how and set of competencies of 9,600 people that are working in research and development at ST. ST is everywhere microelectronics make a positive contribution to the people's life. This is the company vision. This is the ground of our product portfolio, which is focused on five growth drivers: smart power, MEMS and sensors, automotive, microcontroller, digital convergence. You may see our products are a bit everywhere and looks to make easier, richer, safer, healthier everyday life. Life.Augmented, which is our brand. I am sure that likely from this morning to now, you have already experienced and benefit from several of our products in your home, in your car, in your portable device, perhaps in your wrist now. Indeed, ST is number one in MEMS, encompassing motions, acoustic, and environmental MEMS to serve smartphone and portable devices, wearable devices, and now entering automotive. ST is number one in set-top box, excluding the U.S. market, now focusing on set-top box and the home gateway, as well as on ASIC in FDSOI technology. ST was number four in microcontroller. Possibly, we are becoming number two in combined general purpose and secure microcontroller. ST is number two in industrial electronics. ST is established leader. Among the three top players in the industry in automotive, where we serve all the applications from powertrain to body and safety to infotainment. The organization is based on two pillars, the sense and power and automotive product, which represent 60% of total revenues and includes analog, MEMS and sensors, automotive, industrial, and power discrete. The embedded processing solution, which represents 40% of the total revenues and includes three product groups going forward: digital and convergence, imaging, and microcontrollers. The former ST-Ericsson legacy products are progressively phasing out and will be from now included in the digital convergence group. Each of these product segment is accountable for profitability and for cash flow generation, and each of the segment has its own objective to contribute to the company reaching its financial model. We will see it later. You see here the revenues breakdown by product group. The larger groups are industrial and power discrete, automotive, and microcontrollers. Interesting to note, those are the group servicing the applications that are enjoying the largest growth in the industry. Those are the groups that are delivering to ST a profitability which is higher, well higher, than the average margin of the company. As mentioned, ST has exited the wireless IC platform business by splitting up ST-Ericsson in 2013. I want to be clear on this point. ST is not exiting the wireless market, which is among the fastest-growing parts of the semiconductor universe. Going forward, ST will continue to be present in mobile phones and portable devices, including power management solutions, imaging solutions, MEMS and sensors, general purpose and secure microcontrollers, protection devices, tunable antenna, so on and so forth. You will see about our product offering for mobile and portable device in a few weeks at the Mobile World Congress. Our focus during 2013 has been on implementing the new strategic plan, including as a key priority, the exit from ST-Ericsson joint venture. I believe we can say today that this has been accomplished well on time, smoothly under its social impact, ensuring a supply continuity to customers and requiring much less cash than initially planned. ST has taken over the existing ST-Ericsson product and the related businesses, excluding the LTE modem business, as well as equipment and tools in back end in Asia. The ST-Ericsson legacy product generated $133 million revenues in the fourth quarter last year, and given their low margin reflecting the maturity of this product, they have diluted the consolidated gross margin by over one percentage point. These revenues, as you know, are progressively phasing out. ST has taken on board 1,000 people with competencies in the areas of software development, in analog, like radio frequency and power management, in hardware design for embedded processing. All of these resources are now contributing across all the product groups of ST to boost future revenues growth. ST-Ericsson itself is no longer an operating company, and the ST exposure is now limited to covering 50% of its needs to complete the wind down, which are estimated in the range of $30 million-$40 million for each of the partners. Then maybe depending on the results of a process of selling patents ongoing, this estimation could be possibly less. So definitively, ST-Ericsson is no longer a risk to the ST's cash position. One year ago, I was not at this meeting. One year ago, Carlo, with the Chief Executive of Ericsson, asked me to drive the joint venture to that complex transition. Today, I am glad to be back in ST after having accomplished that mission. That, believe me, has been neither easy or pleasant, but a mandatory cornerstone to support and to sustain the future of our company. So back to the core business of ST. The market we serve is large, is a $139 billion market. After three years, the market is now expected in 2014 to return to a structural trend of growth. However, in 2013, it declined. It declined by about 1.7% based on the WSTS preliminary statistics. The decrease was pretty broad across all the applications, except automotive, which delivered a stronger performance. When we talked to you in October, we communicated about a short-term demand correction, and we are experiencing it. We have seen recent signs of progressive recovery in demand. Our booking improved substantially from Q3 into Q4, but remained in Q4 below the level of the second quarter. The good news now entering in 2014 is that the forecast of semiconductor market is a growth in the mid-single digit range. Indeed, WSTS anticipates 4.2% growth. Our second key priority in 2013 was to grow faster than our served market. We did it. Based on WSTS data at the end of November, those at the end of December are not available yet. ST's market share on the served market increased by 22 basis points in the period January-November 2013 compared to the same 11 months of the prior year. The chart on your right instead shows that almost all the product groups contributed to our market share gain, with the largest gain by our microcontroller, both general purpose and secure, and gain in automotive, in analog and mixed, and so on and so forth. However, there is a disappointing aspect on this performance, and this is the fact that the overall market declined rather than grew as initially planned, as was planned one year ago in our financial plan. This resulted in a level of revenues exiting 2013 much lower than what we did anticipate one year ago. Here is our revenues performance. Lot of numbers, lot of data. $8.08 billion revenues in the year, $2.015 billion revenues in the fourth quarter. The fourth quarter went in line with the expectations entering the quarter. These total revenues reflect the progressive phase out of the former ST-Ericsson product. Year-over-year revenues from the legacy product of ST-Ericsson declined by $641 million. You may understand and you may see that will take some time in order to recover this amount, replacing with other products. However, despite the served market decrease, ST's revenues, excluding the former ST-Ericsson part, grew year-over-year by 3.2% in the full year and by 3.9% in the fourth quarter. The main contributors have been microcontrollers and automotive products. Looking forward for the current quarter and for year 2014. For the current quarter, which is generally affected as a Q1 by seasonality, including the Chinese New Year holidays in Asia, the outlook is a sales decrease of 9.5%, plus or minus 3.5 points, and this includes the ST-Ericsson product that this quarter really will see the effect of approaching their end of life and are expected to be at a level lower than half than their level in the prior quarter. For the full year and excluding the former ST-Ericsson product, we reiterate our objective to substantially outperform the served market through new products and expanding our customer base and sales channels. Talking about customer allows me to remind that five years ago, Nokia represented 18% of the total sales of the company. Now, they are still a very important customer. We very much appreciate the business with this customer, but we have to acknowledge that this percentage fall to a few percentage points. This mean about $1.5 billion of revenues that had to be replaced. So another key ingredient of our strategy is to expand our customer base, both through the mass market and distribution and with new OEMs. Looking at our result, today, our 10 largest customers represent overall about 35% of the total sales. None of them in the fourth quarter exceeded 10% on individual basis, which is somehow mitigating the risk of customer concentration. We have been able, as you see on the chart, to add very important names to the top 10 OEMs. You see the names on the chart in alphabetical order. To mention three, I would mention Samsung, which is the largest overall. I would mention Bosch, which is the largest excluding the former ST-Ericsson product, and I would mention Apple, which is the first in the alphabetical order. So equally important for our company-wide effort of expanding revenues is to emphasize distribution. Not only because of the ability to access the largest number of customers through this channel, but also given the higher margin we can capture on this kind of product application and channel. As you see from the bottom chart here, the weight of our sales from distribution is systematically growing. To complete the company overview before moving to the financial performance, here is a view of our global manufacturing footprint. Our front-end fabs are located in Europe, with the exception of a mega fab in Singapore for mature technologies. In Crolles, France, as you know, we master 300 millimeter technology and we manufacture leading-edge CMOS. Recently, the fab has also expanded its technology mix, including products in analog and in embedded non-volatile memories. The back-end fabs are located in a location more better fitting the labor intensive nature of that activity, and the volume are mostly concentrated in Asia. One word on our actions in manufacturing, since as you know, we target important improvement to our gross margin to come from manufacturing. On top of better loading, new technologies, continued performance improvement, a number of structural initiatives in manufacturing are under execution and on track for timely completion. The reduction of the 6-inch in Singapore and the progressive ramp based on demand in 8 inch, the conversion from 6 to 8 inch in Catania, the consolidation of the back-end plants in China, closing the plant in Hong Kong. Foundries are also an important piece of our manufacturing strategy, as they help to mitigate the cyclical nature of the semiconductor business, and they mitigate the capital intensity, especially in leading-edge technologies. We can now move to the financial performance. The financial performance throughout 2013 sign substantial progress, despite more challenging market conditions, especially in the second half of the year. We met our financial objective for the fourth quarter. We moved into our target range of net operating expenses, reducing the break-even point of the company in the range of $2 billion of revenues per quarter. As anticipated, we generated a positive free cash flow, $91 million in the quarter, and we had $741 million of net cash balance at the end of the year. I will talk later about the solid capital structure of the company. Nevertheless, we are not happy. We could not be happy about the low level of the profitability, and we feel the urgency for further improvement towards our financial model. The gross margin in the fourth quarter was in line with expectations as well, 32.9%, improving 50 basis point sequentially. The gross margin in the first quarter is expected to be about 32.4%, plus or minus two points, reflecting the lower revenues and still affected by a suboptimal optimization of the fab, similarly to the prior quarter. While the level of sales in a weaker market environment did not allow a significant improvement so far, we target meaningful improvement exiting 2014, driven by the restructuring of our manufacturing footprint in mature technology, better saturation, production migration into new technology and thinner lithography nodes, replacing the low margin ST-Ericsson legacy product with higher sales of ST's new product. We are also pruning some low margin mature products, taking advantage of reducing capacity in 6 inch. Lowering the break-even point by decreasing operating expenses is another key ingredient of the plan. We have set a goal, as you know, of net operating expenses in the range of $600 million-$650 million per quarter by Q1 2014. In the fourth quarter, we came within this range, if we consider $28 million of R&D grants in the quarter. We still have other initiatives ongoing as we continue to adjust expenses to a slower than anticipated path to increase revenues. Additionally, we do expect the Nano 2017 grants to become effective in the first quarter, assuming the final clearance by the European Union. As a result, we are now targeting net operating expenses towards the low end of our range. As I mentioned, we generated $18 million non-GAAP operating profit in the fourth quarter. This represents a significant recovery, as you see from the chart, from heavy losses in 2012 and the first half of 2013. It's also an improvement compared to the prior quarter. If you remember that prior quarter included $80 million of one-time gain from sale of businesses. We will continue to drive improvement in our operating results in 2014, targeting to exit the year with a significant step up in operating profitability by ramping new and higher margin products, aggressively selling to the distribution end market, optimizing the fab loading, and reducing the manufacturing cost, in addition to lower net expenses. From a product segment perspective, we have a different situation in SP&A and in EPS. Sense, power, and automotive is currently running at 7.7% operating margin. All the group's operating margin are positive, with two of them running at double-digit margin. We target about 10%-15% operating margin for SP&A as a part of our model of about 10% profitability by mid-2015. Embedded process solution operating results are not positive yet, with the MMS, the microcontroller business, yielding a margin in the teens and two groups that are now working on their turnaround. EPS targets about 5% operating margin as part of our overall company model by mid of 2015. But I'm sure Jean-Marc and Georges will expand about the revenues booster, the margin booster for each of these two segments. Another key ingredient of our financial strategy is to reduce the capital intensity of our business model. I believe that in 2013, particularly in the second half of 2013, reacting to market demand, we did a good job showing ability to significantly modulate the capital expenditure. Capital expenditure were $531 million for 2013. This represents a CapEx to sales ratio by 6.6% after the 5.6% in the prior year. Based on the current visibility for 2014, we anticipate a CapEx in dollar at levels similar to the prior year. A point I want to emphasize is that ST has maintained a strong financial position and a solid capital structure despite poor cash flow in 2013. Our net cash position was $741 million cash balance exiting the year. After the distribution of $346 million of dividends, we closed the year with $1.9 billion of available liquidity, and on top, we have about $730 million of undrawn committed credit facility. As many shareholders are here today, hopefully, or listening us by the webcast, it is important to highlight our dividends. 10% per share per quarter as a result for the prior quarter and the current quarter. This equals a dividend yield by 5.2% on the current share price. While the dividend decision is made by the supervisory board of the company on a semi-annual resolution, management considers the dividend as an an important vehicle in returning wealth to shareholders. Let's move now and conclude on the financial model for the company. Looking forward, our financial model targets an operating income at about 10% as assumes on a quarterly basis. Revenues at about $2.25 billion. Gross margin in a range 36%-38%. Net operating expenses of $600 million-$650 million. You may note that further expenses reductions are aimed at compensating in the short term the slower than expected growth in revenues, and they will allow a sustainable profitability even before reaching the $2.25 billion revenues target, which remains our target. Out of these metrics, let me to offer you some more detail in respect to the gross margin. We are there for the operating expenses. Jean-Marc and Georges will expand on the revenues growth opportunity. About gross margin. Gross margin is currently running at 32.9%, so about four points are required to reach the model's target. The increase is planned and is well deployed to come from a number of drivers. The result of the former ST-Ericsson legacy product, replacing with other new product of ST. This is over one point of contribution. The manufacturing restructuring initiative for about another point. The product pruning associated with the capacity reduction resulting from the manufacturing initiative, which is about one to 1.5 additional points. The technology evolution, the better loading, the efficiencies in 8 inch, in 12 inch, in assembly, which is about another couple of points. But of course, please also take into account that on the other side, we have to consider some price erosion, net of mix change as typical of our business. To conclude, ST made a substantial step towards its target profitability in 2013, namely the exit from ST-Ericsson, gaining market share in the core business, reaching the net operating expenses target one quarter ahead of the plan. We are obviously not satisfied with the level of profitability so far, and we have a clear focus and identified actions on each of the three axes of the plan. We expect to grow revenues outperforming the served market, the gross margin expansion, as I just described, and we have ongoing programs to decrease OpEx towards the low end of the target of net operating expenses level. Overall, we feel a sense of urgency to progressively improve the profitability and to achieve our financial model by mid of 2015. At this point, I thank you for the attention, and I would invite on the stage Jean-Marc Chery, General Manager of Embedded Processing Solution. Thank you. Thank you, Carlo. Good morning, ladies and gentlemen. Now I will move on the Embedded Processing Solution product technology and manufacturing presentation. First, I would like to state again what is EPS. EPS encompass three product group. First, DCG, covering ASSPs for broadcast set-top box and client-server home gateway, and digital ASIC for infrastructure communication equipment and consumer. Then IBP focusing on imaging sensor and proximity sensor, imaging signal processor, and analog mixed-signal ASIC and photonics, again, mainly for communication infrastructure equipment. MMS covering on both general purpose and secure microcontroller and EEPROM. As Carlo said, today, we are consolidating former ST legacy product in EPS, but this business is set up to decrease gradually in the course of this year. We have two front-end manufacturing, end technology R&D competence center. Crolles with 8 inch, 12 inch capability, covering and supporting all the three groups. I am pleased to say that in one year, we have had in the technology portfolio of Crolles 300, the embedded flash memory, so to sustain the microcontroller business. Up to now in 18 nanometers, this activity supporting both general purpose microcontroller and automotive as well, represent one-third of the working progress of the capacity. Rousset with 8 inch capability, mainly dedicated to standard microcontroller and EEPROM. It's important to say as well that we operate through a strong and deep cooperative technology R&D and manufacturing partnership with a Tier 1 player like IBM, Samsung, both for technology and manufacturing, Leti for innovation, but with UMC, GlobalFoundries, and TSMC through bilateral agreement. This cooperative and partnership in manufacturing is key to build flexibility both in R&D and in manufacturing as well. Embedded Processing Solution revenue were $3.27 million in 2013. It's 14.6% decrease compared to last year, and mainly due to the wind down of ST-Ericsson. Without this ST-Ericsson product, in fact, the growth was 3.4%, mainly related to the strong achievement of MMS, so +19.1% of revenue increase. In term of operating margin, we are accountable for -12.2%. Of course, it's better compared to last year, so 23.1%, but again, mainly due to the wind down of ST-Ericsson and the gain generated by a microcontroller. Of course, this comeback to a sustainable profitability is my main focus and our main focus. We continue as ST to aggressively pursue our target to generate an operating income at 10%, and as Carlo said, by mid-2015. I would like to confirm today that driving EPS above 5%, we will relentlessly contribute to it. How? Of course, we will continue to control and decrease our operating expenses for SG&A and R&D toward our model. We will continue to improve our manufacturing efficiency and thanks to our partnership. But the key success factor for EPS is a top-line increase. I am pleased to say that, and you will see later on in detail why, we will double by Q4 2015 the DCG revenue compared on today, and we consider today in Q4 and Q1, we are on the bottom of this revenue. We will do it basically in two main ways. I have to say that contributing to this, our technology platform, we call FD-SOI, is moving really from an opportunity. I mainly disclose with you and I share with you during various presentations since, let's say, many months and many years now to a massive opportunity and revenue generator for 2015. Definitively, we are continuing to aggressively win market share in microcontroller toward a worldwide leadership position, and I don't want to be shy to say expected number two. We are executing our technology diversification and customer base expansion in imaging in order to consolidate our revenue on top of the growth we expect from RF, silicon photonics, and optical ICs. Let's have a look more in detail now. DCG. I am accountable for 2013 year-over-year revenue decrease for DCG. Now, this is mainly related to the fact that our legacy product addressing the standard definition broadcast set-top box has decreased faster than anticipated. Basically, we have dropped during the second half of last year, 10 million pieces less and facing a 20% average sales price decrease. We have clearly lost market share. One of the main reasons on top of that is the digital convergence has been put on hold in one major country of the Asian one, where traditionally we were strongly present. We have already reacted. First, we have deployed and we are deploying our new product on 40 nanometer to address this standard definition broadcast set-top box in order to regain market share we have lost with our legacy product. This is first point. Then we have really take opportunity of resources coming from former ST-Ericsson company to revitalize our product portfolio, anticipating the transition to HEVC, so high-efficiency video coding, and ultra-high definition 4K 2K, so 30 then 60 image per second refresh, in order to attack the market of client-server and home gateway. We have rebuilt as well a complete portfolio to attack the U.S. market cable. About digital ASIC, we are now accelerating the development of our product on 32 nanometer. ST has been one of the first adopters of the 32 nanometer high-k metal gate technology offered by Samsung. Now we are accelerating this product. Then we have targeted the consumer market for ASIC, leveraging the key differentiation factor we can leverage from our FD-SOI technology, and I will come back more in detail on that. I am encouraged, let's say, acknowledging the result of 2013, but looking at the potential, I am encouraged to highlight our 2013 efforts and milestone achievements as key to engage the DCG turnaround. We see a strong traction and an early customer adoption of new clients and server and home gateway as well, following the IBC show and start and launch of these programs. We have this time multiple design wins, about five now, including cable in U.S. and in Europe as well. Definitively, we have a very strong traction in our digital ASIC, FD-SOI-based. We have recorded today, if you remember, I share with you something in the range of six design wins at London last year. Now we have about 15, and we have plenty other opportunity in the pipe. We are really encouraged, either with the number of opportunities, so 5 plus 15, but looking at each opportunity at the size of the business we could generate from these opportunities. Now, of course, as you are very familiar with the digital, there is a lead time between the design win, the sampling to customer, and then mass production start and revenue generation. Nevertheless, I really feel confident that in decent market condition, we will double our current revenue in this CG. In two ways. The first one will occur in mid-year this year, so Q2, Q3. First, with the acceleration of the ASIC for communication infrastructure networking on 32 nanometer. The deployment of the 40 nanometer product for, let's say, standard definition or full definition for broadcast set-top box. The second wave will happen in Q4, where we will have the first revenue generated by our client server new Arm-based product on 28 nanometer processed at Samsung. Then we will start the mass production on 28 FD-SOI, both in our fab of Crolles and in a major open source foundry. I would like to come back few minutes and to share with you the reason why FD-SOI now is showing a stronger, well received from our customer. First, if we start with the infrastructure networking customer. Basically, our customer need three major factors of merit in order to design their product. First, they need the best trade-off between performance of the processor or of the logic you have in your design, and power consumption, but also standby leakage. And definitively, FD-SOI has been recognized as the best technology, of course, compared today, the bulk technology, but as better and as equal or better than the FinFET technology. Then the second figure of merit, which is key for the networking infrastructure, is the analog performance in order to design the most performance high-speed interface like the SerDes, which is crucial for this device. And here, definitively, the FD-SOI is better than bulk, but much better than the FinFET. Then the memory reliability. You have to know that at the origin, this technology of FD-SOI has been developed for military application for this reason, because of the huge reliability for memory. And here, for networking equipment infrastructure, either you reduce the size of memory for cost saving, or you argue a better reliability of your device, taking to account this figure of merit. This is what the infrastructure networking customer love. Then consumer. Of course, consumer, they like the first figure of merit, so trade-offs between performances and power consumption, but they like as well the leakage, the low leakage of the SRAM you have in the system on chips. Which provide to you the best power balance in the mission profile of your system on chips. The last but not the least, is this technology offer a huge flexibility in the usage. Means you can operate the transistor from your system on chips at a very low voltage, but delivering enough DMIPS to your system. And at very low voltage, basically, your power consumption is zero. So you imagine that for mobile Internet of Things application, this feature is key. The last but not the least, is that altogether, we repeat relentlessly and consistently since five years that this technology is really complementary to the FinFET one, because in term of design legacy, in term of process complexity, is much simpler and well adequate to all the application I have shared with you. Let's move to the IBP product group now. We have achieved, in 2013, a 5.7% year-over-year revenue growth. Of course, we start to benefit from our product portfolio diversification and customer base expansion. I would like to confirm as well that on top of imaging, we are really leveraging the good partnership we have with optical IC customer and the superior proven technology we have in our end. So analog mixed-signal, both on 8-inch and on 12-inch. We are maintaining our effort on RF SOI and silicon photonics in order to anticipate the major industry move. If I, as this CG, share with you what I can highlight from our 2013 effort in term of key milestone achievement, but revenue booster as well. I can say that it includes a good traction to new customer and application for imaging, such automotive, where we have win both imaging sensor and imaging signal processor. We have ramped up during the course of 2013, imagining a signal processor, both for an important phone maker, but also for a very important consumer brand customer. This must be consolidated into 2014. I confirm that also we have great expectation with our proximity sensor. Most probably, we will see very soon the mass production ramped up in one leading phone OEM of our industry. Thanks to the evolution of the higher-speed links in the industry and the progressive transition of the silicon photonic for data aggregation, we will generate more and more during the course of 2014, revenue from these activities. On top of that, with the fast adoption of the LTE, RF SOI TAM will increase a lot. We have the feedback from our customer that our technology, our current technology figures of merit, has a value proven superior to the competition. We expect to capture revenue from this technology effort. Let's finish by the last product group, the microcontroller. Here, the team is pleased, not me, but the team is pleased to share with you, we have achieved for MMS 2013, 19.2% revenue increase. First consolidating the 32-bit general purpose MCU leadership and the secure element as well. We are really preparing to sustain this growth and this leadership towards the number 2 position, as I have shared with you, with our technology roadmap. We are developing a 40-nanometer technology roadmap with new flash cell, and offering the best figure of merit to both general purpose microcontroller and secure micro. Mainly, the best figure in merit in term of ultra-low power performances, which is really key for all the application like Internet of Things or secure elements as well. Definitively, we remain a solid worldwide leader in EEPROM, and we have recently confirmed we have introduced the first EEPROM fully compliant with the NFC standard. Similarly to the other product group, in term of major achievement and revenue booster, we are confirming our leadership on 32-bit. To where our market positioning was mainly on the mainstream with Cortex-M3 product. Now we are really expanding on the ultra-low power with the M0 core from Arm and the high performance with the M4 core from Arm, and which will provide, to MMS, a really wider product portfolio to continue to surf on the already 60% growth achieved in 2013 versus 2012, to continue to surf on this wave for 2014. As the market growth is more and more driven by mobility, with contactless convenience, but also the tremendous increase of security in the transaction. Our both solutions, for embedded security with the ST33, but also our contactless platform, ST31, will be the key booster for 2014 as well for this product group. Thanks, because it's important for me to mention that thanks to the new low-end NFC EEPROM tag, we will reinforce our position in the Internet of Things market. To conclude this presentation about embedded processing solution. First, we confirm that we will achieve about 5% operating income, contributing to the achievement of the model by ST. The key ingredients are, of course, improvement driver like the control, the reduction, the optimization of the resources toward the operating expenses model. The efficiency of our supply chain, thanks to the cooperative R&D and partnership in manufacturing. But the revenue booster. Revenue booster in 2014 based on surfing, pushing the product, the mass market, the ecosystem on the microcontroller, both general purpose and secure as well. Definitively, the deployment of the new product to regain the market share lost on the standard definition broadcast set-top box. But the acceleration of the HEVC and ultra-definition 4K/2K with our Cannes Monaco products, which are really outstanding product offer on the market now. On ASIC, we will accelerate what we have anticipated on 32 nanometer, and very fast, we will ramp up by end of 2014, the mass production in term of wafer start for FDSOI, in order to generate early in 2015 additional product. Well, definitively, the diversification we have engaged in imaging will consolidate our revenue. And from our technology and capabilities and IPs, we will grow our revenue on analog mixed-signal and silicon photonics. This concludes my presentation. Thank you for your attention. Thank you, Jean-Marc. Good morning, ladies and gentlemen. I will now go more into detail on sense and power and automotive segments. I will cover the focus of the product groups, in terms of markets, products, R&D effort, and key programs, and how all of that will contribute to our company strategy and to the reach of our financial model target. Let's start with the overview of SP&A. The total revenue in 2013 was $4.78 billion, up to 3.3% compared to last year. Pretty well-balanced across the three product groups. Into analog, MEMS, and sensors for 27% of the revenue. Automotive product group, 35%, and industrial and power discrete group with 38%. Since December 2012, with the new organization, we have aligned our front-end manufacturing capacity and the sites more closely to the segment of the company. There are four front-end sites attached to sense and power and automotive. Is Agrate and Catania in Italy, two in France, and our fab in Singapore. And they focus on technology, R&D, and manufacturing for analog, power, and MEMS technology. In the SP&A segment, the focus is now on bringing these solid and profitable businesses to the next level in terms of market share, in terms of profitability, and in terms of growth. First of all, each group enjoys a well position in the market, with, for example, automotive, with the semiconductor content increasing. Sensor adoption, the pervasion of the sensors in many domains, like wearables and mobile, obviously. And the anticipated global macro economy improvement that will help all the segment and especially the industrial part and the housing products. Oops, excuse me. From a product standpoint, we will benefit from the recent innovation effort, especially made in our IPD technology and the expansion of our power management portfolio. We plan to consolidate our position in MEMS and sensors by expanding beyond motion sensors and focus on smart sensor and hub solutions. In automotive, we will continue to leverage our strong position, broad-based portfolio, and pipeline of design wins. Globally, we will also want to pursue our effort in mass market and distribution, expanding our customer base. From a margin perspective, SP&A will fully enjoy the impact of two manufacturing efficiency improvement programs, where we are converting the capacity from 6-inch to 8-inch in Catania and in Singapore, as well as the consolidation of the back-end facility in China. Now let's have a look by product groups. Here is an overview of analog, MEMS, and sensors, AMS. The revenues were $1.3 billion in 2013, down 1% year-on-year. The MEMS went flattish, coming after an already strong year in 2012. Also, AMS has been a division particularly impacted in terms of revenue in 2013 by the product pruning efforts on low-margin products within its general purpose and analog business. This is for good reasons, and we are happy that we can now afford this type of effort. For several years, product strategy has been clearly established and executed, extending the product portfolio to new sensors beyond the motion MEMS. We are now able to offer four category of sensors, motion MEMS, acoustic MEMS, environmental, and touch sensors, and without forgetting that AMS also contain our general-purpose analog offer and micro actuators. The strategy is clearly to leverage our leadership position to take advantage of increasing sensor pervasion, and a market move which is more particularly driven by mobile application, wearable devices, and also now the Internet of Things. The particular area of focus in this strategy is to offer a complete smart sensor hub and solutions combining sensors with microcontrollers, connectivity, and power management. We added several steps executing along this strategy in 2013. We have consolidated our leading position in motion MEMS. We wins at top phone OEMs and in wearable. We have also recorded successes in our new sensors offer. We have shipped more than 100 million unit MEMS microphones and multiplying our revenue by four. We had several wins for environmental sensors. We started shipping a new touchscreen controller to a large Asian consumer OEM, and we have taken our highly integrated smart sensor system, iNEMO, into high volume production. At the same time, we have maintained innovation across the existing product portfolio. For example, we have launched a new family of Android KitKat six-axis motion smart sensor. We have also shipped the world's smallest and lowest power six-axis compass, and we have executed on our customer base expansion initiative. For example, doubling sales with Chinese smartphone OEMs. Finally, from second quarter last year, we were in a position to dedicate specific effort to prune our mature business in this product group to significantly improve the profitability in this area. What are the revenue boosters for AMS in 2014? Growing the new products, single-membrane microphone, high accuracy pressure sensors, touchscreen controllers, gyroscopes for optical image stabilization. We'll continue to diversify in MEMS and ramp in automotive wins. We'll also have a major mass market initiative. For general purpose analog, and ramping production on low power small six-axis family for mobile and wearable devices. Let's have a look now at the industrial and power discrete group with the revenues were $1.8 billion in 2013, representing 22% of the company with a growth of 3.1% year-on-year. This despite the challenging macroeconomic condition, which particularly affected the mass market and distribution part of the business. Our product portfolio here is focused on power, smart power, and analog ICs, for a wide range of applications for industrial and consumer products. R&D efforts are dedicated mainly to industrial and portable applications. Our strategy in IBP is to drive revenue growth and profitability, through a balanced presence in OEM and distribution. In 2013, we have continued our course of production innovation. For example, we launched the world's first intelligent gateway system on chip for metering, embedding power line modem metrology and diagnostics. We introduced the best-in-class 600-volt IGBT and high-performance low voltage advanced trench MOSFET. In 2013, we also enlarged our product portfolio to a new power management IC family. For battery management in mobile platform and handset, thanks to resources we got from ST-Ericsson. We also got a good traction on recently launched products. We reinforced our leadership in AMOLED driver products. We had volume shipments of our tunable capacitors for 4G LTE devices to leading smartphone OEM manufacturers. We expect items to translate in revenue boosters in 2014. First, overall macroeconomic improvement, in particular in industrial and housing, should help. Our dedicated return on marketing campaigns also is gearing toward distribution and mass market. In terms of product, we expect to be able to leverage our recent investments in innovation for discrete, in advanced high voltage and low voltage MOSFETs, in rectifiers, IGBT, and silicon carbide diodes and transistors. We'll ramp also the design wins collected in smartphone and tablets for tunable capacitors, RF couplers, balance and filters. Still, in smartphone and portable devices, we expect to maintain our leadership in AMOLED drivers with a new generation of products. Let's turn now to APG, Automotive Product Group. This group has really been a bright spot in 2013, the only part of business which continued to enjoy favorable market conditions despite the softening in the second half. The revenue were $1.7 billion, up 7.3%, about 21% of total ST revenues. Our product portfolio covers four blocks: infotainment, with telematics and GPS and car infotainment; body electronics, with door modules, anti-theft lighting, wipers, et cetera; safety, braking, vehicle steering, airbag, active safety; and powertrain with the engine control and the transmission itself. Our strong position and product portfolio allow us to benefit from increasing semiconductor content in cars. This favorable trend in several years now is still going on. Short-term, the key drivers are the evolving market requirements in the areas of fuel efficiency and active safety. Our areas of focus are more here, particularly smart power, active safety and positioning products, infotainment, and on extending our successful family 32-bit power architecture microcontrollers for automotive. As I said earlier, APG enjoyed strong growth in 2013, and this was across all applications. The 32-bit family contributed strongly with over $100 million in revenue. We have now collected more than 2.5 billion design wins, which will enable us to continue to grow this business strongly. We have a double-digit growth in smart power products, and we confirm our leadership in this category of products with our latest 110 nanometers BCD design ads process. We also achieved major growth in active safety with radar and vision-based products. In infotainment, we collected important wins in telematics and navigation, moving from low-cost PND application to key in-vehicle features, and announced our latest generation of industry-leading multi-constellation satellite positioning chips. Also, it is worth noticing that sales initiatives to broaden our customer base has paid off with 25% of APG sales now done through distribution. We expect APG growth in 2013 to be particularly supported by the following elements: continuing to gain market share in 32-bit microcontrollers and doubling the revenues, continuing major effort on enlarging customer base in distribution and mass market to increase capability to support the full system development in automotive. Ramping products in new leading-edge technologies with embedded flash on 300 millimeter and smart power, and focusing on high-margin products, infotainment, active safety, and positioning systems. To summarize again, the sense and power and automotive segment is already solid and should be able to convert a number of opportunities to get to the next level in terms of market share, growth, and profitability again. Fourth quarter net revenue were $1,233 million in Q4, an increase of 4.2% compared to the same quarter last year, driven by APG and IPD mostly. Operating margin was 7.7% in 2013, fourth quarter, compared to 6.2% in Q3 sequentially, and increased principally by the product mix improvement. As already discussed, our main revenue boosters in 2014 for SP&A are expected to be the MEMS and sensors new products, high-performance microphone, fingertip, gyroscope for optical image stabilization, 32-bit microcontrollers for automotive, power and smart power for industrial and automotive customers. Overall, the macroeconomic improvement also in the housing and industrial markets and our effort that we are developing in distribution and mass market to enlarge the customer base. Together with this growth, several elements should add to improve our margin. The result in product mix improvement, the optimization of the fab loading, the various customer base expansion initiatives, and improved manufacturing efficiency and flexibility resulting from current manufacturing programs. The contribution of each group should lead the segment to reach an operating margin midterm between 10%-15%. Thank you. I now turn the stage to our President and CEO, Carlo Bozotti. Well, I think I don't need this. That is fine. Well, first of all, thank you again for attending our meeting here today, and good afternoon, everybody. I think it's afternoon now. I think this is a very good moment to tell you where we are. In fact, we are in the middle of our path to the financial model and the new strategy that we have defined one year ago. This is the post-Nokia, this is the post ST-Ericsson phase. The weight, of course, the former major customer in ST has gone away. It was almost 20%, and now it's down to few percentage points. I started one year ago, and what I want to do, of course, for me, is really to summarize what has been said so far and also to make sure we underline the priorities for 2014 and what we want to achieve this year. If we start from 2013, there are many things that we have done properly, and that I believe, at least my assessment is that they have worked well or pretty well. There are a few things that have not worked out the way we expected. Let's go through. I think the breakup of ST-Ericsson was executed very well, timely, with also a cash cost that was overall below what we expected at the beginning of last year. We also exploited the breakup to reinforce, thanks to important competencies coming from ST-Ericsson, a number of product R&D activities in ST. Then I think we successfully managed, well, it was, of course, mostly due to ST-Ericsson, but not exclusively due to ST-Ericsson, to reduce our operating expenses by about 20%. That, of course, is a very significant number. We are talking about a reduction of about $220 million, Q4 2013 over Q4 of 2012. As a consequence, if we look at the operating income before impairment and the restructuring, we turn back to some initial profit in Q3 2013, more thanks to, let's say, one-off initiatives and more structurally in Q4 last year. So it's initial small profit, but I think it's important to compare the situation of Q4 2013 with what we had one year earlier in Q4 2012. We move and I am reporting the so-called operating income as attributable, because if you look at as reported, it will be much better, but unfair because, of course, in the P&L, when we had the joint venture with Ericsson, there was also a minority line, let's say, that was positive for ST. So I am reporting just the attributable that is really comparing Apple with Apple. We went from a negative of $66 million in Q4 2012 to a small profit last year, +18 million, and even more if we start from Q1 2015, Q1 last year, where our attributable operating loss was $100 million. So in one year, we moved from a loss of $100 million in Q1 to a small gain of 18 million. Of course, we know that this is not enough. We also turned to a positive cash flow at the end of last year, as we said, with $91 million of positive cash flow. We kept during this difficult phase, that was for us to absorb the major decline of the revenues in Nokia, in ST-Ericsson and in ST, but as everybody else, also through the various phases of the crisis. So we managed to protect our net financial position. We have a net financial position of about $740 million after the distribution of $0.40 per share of dividend, that were absolutely flat during these difficult years, and after having invested about $530 million in innovation and manufacturing capacity. We started important structural changes also in the manufacturing footprint with a program to close two additional 6-inch fabs, one in Europe and one in Singapore, and to grow in the two sites, the 8-inch activities, and at the same time to consolidate all the back-end activities that we had in China in our site of Shenzhen. Very importantly, we also managed to grow more than the market. Our growth, as we said at the beginning of the meeting today, was 3.2% on the core business. Clearly better than the market. We have the full report now, at least through November, but of course, nothing will change adding one month. We have from WSTS, the market that we serve declined by 1.7%, and we managed to grow 3.2%. We did that on most of the product lines that we have. In fact, out of the product groups that we have, only DCG lost market share, and the major gain clearly was in our MMS group, particularly on microcontroller. There were also things that did not work out the way we wanted. The first that, of course, is very material is, indeed, we gain market share, but the top-line evolution was not what we had expected. At the beginning of 2013, we had a forecast from WSTS calling for an increase of the market that we serve again by 4.6%, and this did not materialize. In fact, as I just said, the market declined by 1.7%. No matter what, we are below the expected level of revenues in the second part, particularly in Q4 last year. Also, we did not expect such a, I would say, rapid decline of the legacy products in DCG. This is clearly a concern. Last year was a major concern. The decline is on all products. This is on products that are mature, on products that are typically for the Asian market, but not exclusively, but mostly for the Asian market. I believe that we are now at the bottom, and I will elaborate more in two seconds on what I see and what is my assessment today of the situation in DCG. If we move on to 2014, I would like to start from bookings. When we met three months ago, we had experienced a lower level of bookings during the course of Q3. Bookings in Q3 was reduced, particularly in Asia, and particularly in the mass market and in the distribution in Asia. Our Asian distributors, they had important concerns, and they, in fact, at the end of Q3, during the second part of Q3, they projected a decline in Q4. This was, I think, of course, one important data point for us. I think we managed to keep the inventory distribution well controlled. Anyhow, they had a negative view at the end of Q3. I think the negative view was mostly related to concerns on access to credit in China, particularly for the small and medium-sized enterprises. If I look at the results, I have to say that this concern has gone away. First of all, in all the regions where we operate, the POS, the point of sales of our distributors, hit a record high in Q4, and the bookings in Asia restarted pretty strongly in the mass market and particularly in distribution. Overall, in Q4, our bookings increased compared by Q3 by 20%. This is sequentially Q4 over Q3. It was a strong improvement in the booking trend. There are areas where bookings was really good, like, as I just mentioned, the mass market and distribution everywhere in the course of Q4, supported by good POS. Not what we bill, but what our distributors bill. Also was pretty good in automotive, again, across all the regions on a wide range of products. On the other hand, we saw some, and it is not new, also some flattening and some evolution that is not positive in the smartphone, particularly when moving from the last quarter of last year to the first quarter of this year. We are more encouraged overall by the global booking situation and particularly by the situation in Asia. Now, if we look at the market projection for this year, I think we mentioned this number, 4.2%. Of course, it is not coming from ST. This number is coming again from market research institutions, particularly for the WSTS. But I think it represents pretty well the consensus. If we put all together, it takes a big average. It is a number that, frankly, we had also more or less one year ago. I think I am confident that this time is better supported by fundamentals at the macroeconomic level. Recently, for instance, the IMF, they have increased their view in terms of global GDP growth in the world, giving now a figure that is about 3.5%, is 3.7%. I think hopefully, the market that we serve will be back to some material growth after three years of small decline or some decline, and supported by an overall improvement at the macroeconomic level. Well, in this context, of course, we want to gain market share. We had some gain last year. We want to continue. My colleagues, they have described and underlined what are the key growth drivers for this year, and I do not want to repeat, and I do not want, of course, to go too much in details, but I would like to mention two families that are really very, very instrumental. Of course, I would like to start from DCG. As I said, in DCG, we have experienced a severe reduction of the sales during the course of last year, and this is again on mature products. Is mostly, even if not exclusively, in Asia. Last year was very critical from this point of view, but very important in terms of innovation. As some of you may know, we had started a significant change in our set-top box and the home gateway products moving into Arm. The first device was introduced. This is an initial step, but important, because we had to work for two, three years on the move to Arm for our set-top box products, and I believe we have anticipated the market in this move into Arm. One of these product that is the first generation of the product is the Orly 1, is in production, for instance, in Japan. We expect this year the volume to grow significantly in Japan on this product, this is for fiber to the home. It is in production. It has been selected by NTT, and we can say because it is in production, and of course there are a couple of box makers that are Japanese makers to support NTT in terms of production. I personally attended the demo. It is really exciting for consumer, what you can do with this machine. More importantly, in September, we have launched our new families at the IBC in Amsterdam. This is the Cannes family, this is the Monaco family. I saw, initially, a lot of traction, this was, of course, in September and October, with major operators. More importantly, we have now major wins. We have major wins with, you can call the biggest and the best operators in the world. We have major win both in terms of cable applications and in terms of satellite applications. Of course, this is encouraging because we are talking also about high-end here. We are talking about products that could be in high volume, starting in the second part of this year and then growing in 2015. The effort with the operators is continuing. Of course, we are also working with the box makers and our direct customers, but we have a very strong specific effort with all leading operators to promote our new technologies that, as I said, is not only based on Arm, so it is more open platform, but is capable to run applications for the 4K, for the most advanced transmission and decoding standard, the H265, and with a very good quality in terms of image quality. At the same time, as you know, in DCG, basically we have two divisions, two product divisions. One is the set-top box, the other one is ASICs. At the same time, we have transformed, I believe I can say now, we have transformed the FD-SOI opportunities into real wins for very high volume applications. These are high-end applications, but it is consumer applications. So it is high-end, but it is also high volume. Many of these things will hit the market in 2015. Here what is great, of course, is the combination of high volume products and therefore high price products, and at the same time, high volume or very high volume. Of course, we cannot manufacture all of these products, and we do not want to manufacture all of these products in ST. We want to make sure that we have a controlled effort in capital investment. We are very confident that a prestigious second source will be running by the end of 2014. It was tough last year. I think the bottom is now. I believe it is a major transition in terms of technology products, moving earlier to Arm, the introduction of the FD-SOI. But now I am not talking any longer about opportunities, I am talking about major wins, and they are all major customers, either direct customers or operators. I wanted to go in details of this because, of course, this is very crucial for ST and very crucial to make sure we timely meet the financial model of the company. I would like to spend a few seconds also on another line where the results are already there, but still, we can grow from there, and this other line is microcontrollers. We have various flavors of microcontrollers. I think we have microcontrollers for automotive. We have microcontrollers for the general purpose applications, of course, for the mass market, our distributors. We have microcontrollers also for secure applications. I think we have done pretty well in the three areas. For instance, in the automotive, last year we doubled the business. These are the new design that we had with the power architecture for microcontrollers. It was an initial year. We were vocal already on the size of the award that we have, $2.5 billion of award, but we plan to double again this year. In the general purpose microcontroller, we grew 60% with our STM32, that is the first mass market product, again, based on Arm. For the first time in Q4, we have exceeded $100 million. Overall, in the 32-bit MMS product group, apart APG that I already mentioned, last year, we have exceeded $600 million in 32-bit microcontrollers, either general purpose or secure. I mention microcontrollers because it is also one line that is very crucial, very critical for our success in the mass market. Of course, we are working with all the major distributors in the world, in the U.S. Well, they are either American or Asian. They were shortlisted in the presentation of Carlo earlier in the morning. You can visit them. Everybody will tell you about our STM32, even at the maximum level in the company. They know this product. It is a very successful family. We have built up a very strong ecosystem. Now what we want to do, of course, is to make sure that we exploit the strength that we have in distribution and in the mass market on the microcontroller to guarantee that we can sell a chipset around the microcontroller, also supporting our customers in terms of application, reference design, and application boards. So now the top line is fundamental in our recovery. It is fundamental not only for the leverage in general, but also because this will allow us to drive better the loading in our manufacturing facilities, particularly in front end. Carlo Ferro earlier said that there are other key ingredients in the gross margin improvement. Of course, the product mix, including the pruning of certain low volume, low margin products. Clearly loading is important, and we are driving the top line also to improve our gross margin together with the mix improvement initiatives and the fab restructuring initiative, as I just mentioned before. Before I go to the financial model and before I, even personally, but for the management team here and for the company, we confirm our commitment. We have done many steps last year. Many more things must be done this year to get there during 2015. I want to mention expenses. It is not very glamorous, but I think it is important. Last year, we managed to drive down expenses Q4 over Q4 by 20%, this is set to $220 million. We were just in the range that we gave. The net expenses were at $247 million. This is in the range, but clearly it is not what we want to do. We want to be at the lower level of this range. Also taking into consideration that in terms of the top line, we are low what we expected. We are driving this program, that is a very important program in the company, to work with a level of net operating expenses that are in the lower part of the range. This also thanks to the contribution of the grants that we expect from the contract that we have with the French government, the so-called Nano 2017 frame agreement. We are now waiting for the European Union clearance because indeed we have signed last year the agreement with the French government, and we expect that this agreement will come during the course of the first quarter. Additional measures in controlling our gross expenses and the contribution of this new wave of grants, the so-called Nano 2017, will drive our net operating expenses in the lower end of the range that we had given. In the final day, I want to conclude reconfirming my personal commitment, but also the commitment of the management team, the commitment of the company to drive ST into this new phase that, as I said, is the post-Ericsson phase. To make sure that we get into our 10% profitability model by mid of 2015. I would conclude here. Thank you again for your interest, for your participation today, and of course, we are now available to respond to any of your questions. Thank you. We'll have our speakers come up and take a seat, and we'll open up the floor. We should have some microphones rolling around for the benefit of those on the audio webcast. Do we have any first questions? Okay, let's go to Dan right there, the gentleman. Thanks, Tait. Can you hear me? Yes. It's Dan Gardiner, Tait. A couple of questions about EPS. You talked about hitting a 5% margin target. Can you tell me what sort of revenue base you think you need to get with an EPS to get there? Does the 150 million or the doubling of DCG, does that do it alone? Or given that's relatively low margin business, do you need incremental revenue? The second question beyond FD-SOI, can you indicate what sort of level of FD-SOI revenue you're expecting by 2015? Can you confirm that there will be a second source for manufacturing that at that point? I answer immediately the last question. We will announce timely, I expect in the course of Q1, the name of the second source. I cannot today. You know that publicly, I already announced one year ago that we have a license agreement with a GlobalFoundries, but this license agreement is not exclusive. I can simply confirm to you that today we will have, okay, a second source open. Offering the FD-SOI for our own needs, but also, okay, for the competition. We will announce it, I expect, in the course of Q1. Then, in 2015, more difficult to disclose, let's say, exact numbers about the FD-SOI revenue. This is clear that all, let's say, the additional billing doubling the current revenue of DCG will come equally from the new client server device. We will grow starting Q4 and the big volume from the ASIC from the consumer market. The fact we will double the revenue will be mainly related to these both activities. It's very material. We are talking about, as I said, very high ASP and also very high volume. We expect very material sales, tens of millions of USD per quarter, in the second part of 2015. Very material for the company. We will move to, I think, Andrew. There was one. Oh, I am sorry. Max? Yeah. There was a. The first question? First question. Question. The first question. With all this growth, in fact, if you have seen the number today, the step number one is to come back to a quarterly run rate revenue at $800 million per quarter without the former ST-Ericsson legacy product. Starting this point, moving to $850 million, $900 million, we will have the 5% operating income. Okay. We will move to this gentleman right here, Andrew. Thank you. Andrew M. Gardiner from Barclays. Just a question on your comment, Carlo, on the bookings. You mentioned in the fourth quarter that you'd seen it pick up materially, so at 20% sequentially. Just relative to then how you're seeing the first quarter play out, clearly, you've got a sequential revenue decline. I'm just wondering about sort of the duration or the extent of your visibility into the bookings now. At the third quarter results, you were also saying that it was not only were bookings weak, but you had relatively limited visibility time-wise. It seems as though that's improved, and I'm just wondering sort of how you're expecting a ramp through the year. It seems to suggest a very big pickup from the second quarter onwards. Well, I think a very important part of the decline in Q1, of course, is ST-Ericsson, because the drop is massive this time. Now, of course, this is negative. These are also products with a very low gross margin, as we have discussed in the past. But the major contribution is really this time a very significant decline of ST-Ericsson. Now, on the bookings, I think I reported the number. The number is 20% up. I can also report that today is continuing in the first week of January. It's continuing particularly in areas like industrial, the mass market, the distribution. It's continuing in the automotive, and it's across the board. I think the concern that our distributors had during the course of Q3 in Asia did not materialize. Their concern was, my POS will go down in Q4, therefore, I need to stop buying because I do not want to build up inventory. This did not happen because our POS in Q4 was record high also in Asia. So they sold a lot of our products. An area that is more critical is the smartphone. I think there is a significant reduction in the volume in the Q1. So of course, we need to make sure that we are not over-optimistic, and I really believe that it's important that we drive expenses much closer to EUR 600 million rather than EUR 650 million. But we are more encouraged by the booking trends that we have seen in Q4, what we are experiencing on the mass market and in the automotive today, and also by the forecast of the market. Because now it's three years that the market is flattish, even declining, the market that we serve. But this, as I said before, I am more confident that this forecast that is coming from market research institutions this time is better supported by fundamentals, by the evolution of the GDP, the global evolution in the GDP in the world. For instance, recently I believe that the IMF has increased their forecast for the global GDP in the world up to 3.7%. So I think we need to be careful. We will drive expenses down. This is, of course, not easy, but we want to do that. Of course, we need to ensure that we get this European Union clearance on the grant. We are confident in driving expenses, but we are also a little bit more encouraged by the booking situation. Thank you. Just a quick additional one, if I may. During the second half, you guys had mentioned increasing competition within the MEMS market. That wasn't something you highlighted this morning. I'm just wondering if there's any update on the state of play in that part of the market. Well, there is increased competition, and the way to respond is diversification. There is increased competition, even if Q4 was pretty good in terms of results on MEMS for ST. I think there is increased competition. The increased competition is more concentrated on certain products. We want to become broader. I think the effort that we are really trying to do is to be successful with, for instance, environmental MEMS, to be successful with the microphone MEMS, but also to be successful with the touch sensor. So this is with innovative hovering function, and to be successful outside the smartphone, to work more in the automotive. It takes time. So I think it's clearly, let's say, an area where we are driving diversification very strongly. We believe, we think that wireless and smartphone is important, but we do not want to be over-dependent on the smartphone, particularly on very few customers. Today, we are at the global customer level, a situation that is more balanced compared to what we had in the past. In Q4, even with the legacy products of ST-Ericsson, no customers exceeded 10%. Of course, with the reduction of ST-Ericsson, this will be even more true. What is important for us is the diversification of the customer base, the big effort in the mass market. In the case of MEMS, to make sure that we succeed with the new families, the new products, with the automotive, with the wearable, and not only with few smartphone players. Good afternoon. Amit B. Harchandani from Citigroup. Thanks for taking my questions. A couple, if I may. My first question revolves around the growth forecast that you talked about for this year. I believe it was something like 4.2% year-over-year for your addressable market. Last year, you seem to have outperformed your addressable market by close to 500 basis points. Looking forward to this year, are you realistically confident of at least doing 300 to 400 market share gains in addition to the growth of the market? I cannot say. This would be too aggressive. Of course, we have our own ambitions, but we also have competitors. I think last year we managed to grow. Our strong ambition is to make sure that we do better than the market. We had defined a model. The model that we had defined just one year ago, when we described our new strategy, is that on the period, we wanted to grow 50% higher than the market. This was our model. If the market that we serve, that as you know, is about 50% of the semiconductor market. You saw before, $139 billion is about one half of the semiconductor market. Well, one year ago, when we gave our model, we said this market is a market that will grow between 4% and 4.5%, and in this frame, we want to grow 50% faster than the market. And that we confirm, of course, our ambition. Okay. The second one, if I may, with respect to your capital spending this year, could you maybe just give us some color in terms of how you plan to spend the money on CapEx this year? What would be the key items on the agenda? This will be capital spending in 2014. It would be around a combination of mixed technology improvement at the various fab. We have, for instance, indicated 12 300 moving and adding embedded nonvolatile technologies. Some increase in capacity that will be managed as usual and modulated based on demand. Of course, another important driver of capital spending is the continued effort on technology innovation. So the evolution from the 28 nanometer towards the 14 nanometer in Crolles 300 research and development. The fab evolution from 6-inch to 8-inch, both in Singapore and in Catania, will call for capital expenditure moderated depending how demand for this product will evolve in the year. It's a year where we plan substantial growth in almost all the product groups. You may expect that also investment in some of the assembly, but more importantly in testing and probing, is another important part of our capital expenditure. Thank you. Our next question. Hello, Stephane Houri, Natixis. One question, coming back on DCG, because you've talked about doubling the revenues, but what about the profit? Because when you target 5% EBIT margin in EPS with microcontrollers, about 10 something, does it mean that you're targeting zero, basically, even with a doubling of the revenues in DCG? That's the first question. Got it. Thank you. Well, frankly, I believe we are not here at the end to deploy the model group by group. We deployed segment by segment. It's not for deploying a group by group or at the next step, division by division. Right, Stephane? However, I believe the key message you may have captured is that, at the end, we have a target objective for the total company in mid-2015, about 10% of operating margin. This encompasses the ST and the group between 10% to 15%, and EPS at about 5%. I have offered other data points, including the microcontrollers business running at operating margin in the teens. Of course, we want to keep this level of profitability in microcontrollers. Then at the end, the math will suggest you how to model. The reality is that at the end, the objective is to continue to improve in digital consumer, to generate a profit in digital consumer. Pull the full level of profitability in digital consumer, the one that the group could exploit with the potential of the product, is required by mid-2015 to make about 10%. You make the math, and you may understand that what's important, they will well progress, move on up, but not necessarily fully exploit the potential profitability of the business. Maybe also the point is that it might be a too cautious assumption to have 5% for EPS if you really target to improve your profitability in DCG. This is what I meant, by the way. The second question would be on MEMS. Clearly, I would like to understand if you are targeting growth this year in the MEMS business, and if we are going to see some first results of the diversification in this business this year. I think yes, of course, we are targeting growth. I think what is important for us, of course, is continue to gain market share. In AMS, we are also pruning products. Last year, we started. We will continue this year. There is some pruning that we are running in the company. There is a special initiatives that is an important initiative of the companies on pruning, and a group that is very much impacted is AMS with certain old products. For instance, I think in the chat before, we mentioned standard logic products. So there is a level of prunings. But indeed, we are targeting growth. What we want to do is to make sure that we diversify more. This is normal. A very good example of this diversification is what we have in the automotive. It's pretty broad, and we want to make sure we follow the same approach. But yes, indeed, we are targeting growth. Okay, good. Morning, Giuseppe. Luigi Singermonte. I have two questions. The first, what will be the normalized tax rate for STMicroelectronics in the next three years, and if there are some one-off positive or negative this year, 2014? My second question regards the ST-Ericsson legacy products. Do you plan to make some write-off that could have a positive impact on gross margin from some day forward? Thank you. Maybe I take the question on tax. I want also to thank you for the question, since I believe may help to guide on somehow improving and modeling our tax, recognizing that 2013 has been, in this respect, a bit a bumping year, with a lot of one-time and different implications. In the last years, this bifurcation of profitability between the ST and the ST-Ericsson part did not help to easy model. Here, I would suggest a rule of thumb that I cannot guarantee will be exactly the reported number, but it is the one I share with you that we do adopt internally to model tax when planning. There are an amount of corporate income tax that are substantially respective to the level of profit before tax, thanks to tax legislations in Europe, where at the end, you may pay tax on added value in a few number of countries to whom we are significantly exposed. This is about a $7 million charge per quarter. Then if you add the usual effective tax rate of the company between 12%-15% to the profit before tax, you are modeling minus the 7% of tax expenses or plus the 7% of tax expenses for this fixed part. You get a number. This is the way we do model internally, and I am happy to share with you the model. Perfect. So there is. Yeah, the indirect tax is about 7 million a quarter, no? A quarter. A quarter, yes. 7 million a quarter. A quarter. Absolutely. Thank you. Then there is, of course, the tax on the profit that is between 15 and 20, no, Carlo, overall? No, what we recommend is 7 million per quarter plus 12%-15% of the PBT. Then depending on the level of profit, you may fall to these levels here. Yes. Good. But yes. Okay. This is the model. I think it is important to clarify this because, of course, we are getting out from a phase where now on the write-off, I think you can. But first of all, really, I believe the company is making very good progress on the fundamentals. This is, at the end, what is the sound way of turning around. Frankly, it is not a matter of writing off assets. At the end, those assets of the company that are no longer instrumental, like those related to the Fab restructuring plans or to the plant restructuring plan in back-end or former ST-Ericsson assets, those have been well-realigned to their fair market value already in our books. Thank you. Thank you, Giuseppe. Alain, why don't we move right up these two gentlemen? Well, regarding ST-Ericsson in general, there are also opportunities, right? For instance, in the area of patents, that is an area that is still an opportunity for the company. I'm talking about ST-Ericsson. Thank you for the question, Carlo. I expand on this point, which I did mention. Essentially, today in ST-Ericsson remain only a very limited list of tangible assets and all the patent portfolio of the company. There are over 1,000 patent families, and together with Ericsson, we have started a process to sell these patents to third parties. This is an opportunity that when and if materializing, would, of course, substantially mitigate, and very substantially mitigate even the remaining few tens of million dollars of cash need through the final wind down of the joint venture. Régis Decq from L'Usine Nouvelle. You didn't mention Nokia this year. Does it mean that the business with Nokia is going better than last year? What proportion of your revenue now Nokia represents, and what do you think about the takeover of mobile terminals of Nokia by Microsoft? Is it still a risk for you? Well, I didn't catch the second part of the question, but if we start from The first. Yeah. The first part of the question, I think we did mention Nokia. Of course, we cannot release the sales figures, because we have an obligation to release the sales figures for any customer that is above 10% of the company. Today, we do not have any customers that is above 10%. But we did mention, Carlo and myself, that Nokia today represents a few percentage points. Of course, it's an important customer. We want to work with all the important customers that we have and that we may have in the future, but it's very far from a level that we had in the recent past. Also, it's very far from the level of the forecast that we had in the very recent past. The comments on the quality of the smartphones, frankly, we are here to contribute with our technology. I think in the smartphone today, we do not have the application processor any longer as a standalone offer. We do not have the modem, clearly, but we have a lot of peripheral products from power management to the AMOLED drivers, the MEMS, the proximity sensor, the tunable antenna, the secure microcontrollers, the secure SIM, the microcontrollers for the fusion hub. There are plenty of products that are around the digital core, and we believe we can contribute to, of course, the Nokia and the Microsoft operating system, but in the same way we can contribute to Android or other proprietary. Just the second part of the question, what do you think about the takeover by Microsoft of the mobile phone of Nokia? Is it an opportunity for you or a risk? Well, I think, again, I cannot comment. These are important customers, because also Microsoft is an important customer for ST. It's not only Nokia. Nokia, of course, is part of our initial major accounts, but we also have established a number of new major accounts that we are focusing on, and Microsoft is one of these important customers for ST. And of course, our hope is that through the combination, they could sell more hardware pieces, smartphones or tablets, because, of course, we believe we can contribute with the product portfolio, even if at the peripherals that we have. And by the way, this product portfolio is also the product portfolio that could really contribute to improve the interface between the man and the machine, because many of these things, like for instance, the touch, the new touch solution that we have is really the way you interface with the smartphones. Good afternoon. Three short questions, if I might. One, if you could refresh us with the foreign exchange rate embedded in your 10% guidance. Second, you called a low point for Q1, and revenue-wise, does that mean you're expecting quarter-on-quarter sequential revenue growth throughout the rest of 2014, i.e., Q2 higher than Q1, Q3 higher than Q2, et cetera? That's the second question. And the third question on microcontrollers. Cores are available to license from Arm to anybody. So what's the differentiation for microcontrollers? Is it memory? Is it the because you highlighted flash several times, or is it something else? Thank you. Well, maybe if you agree, I take the last one. I think on microcontrollers, I think it's a number of important things. Clearly, Arm is available to everybody. However, we have started earlier, and this is important not only because we started earlier on the physical products, but because we have exploited this time frame to build up ecosystem on microcontrollers. And the ecosystem, of course, is the product. The ecosystem is one, two, three, four type of cores because we have a variety of cores from very low power to very high performance. There is the peripherals that we have, including analog peripherals. But it is also a major effort on the web that we have with our microcontrollers, with a lot of information concerning applications, for instance, but also simulation tools, software tools. It is also a major effort that we have done in terms of developing reference designs and application boards, where the microcontroller is in the middle, surrounded by power and analog products. I believe it is, of course, in general, the fact that in terms of technology and in terms of quality of the products, we have now an important asset that is not only the 8 inch of the past, but it is also the 12 inch. Today, in this very moment, if you take a fab like Crolles, I think more than one third of the fab is on advanced microcontrollers. So it is the new non-volatile memories technologies. So it is all of this. It is a combination of many things. Overall, it is the ecosystem. Now competition is there. We know that. This is a big business. We have some hope that if we put together a secure microcontroller and general purpose microcontrollers, last year, we should be number 2. We have some hopes. We will see the results. But this will be great because 2 years ago, we were number 4, and we know that Renesas is much bigger than us. It is also the result of the combination of three companies. But our ambition, of course, is to grow a lot in this business. This is without automotive, because automotive is different product and different technologies. One question was on micro, then there was one question on the exchange rate and the revenues progression. The question, I believe? Low point. You said this is the low point. Yeah. Okay. Would the guidance reflect sequential growth throughout the year? The first question is about the exchange rate. The outlook for the quarter is based on an average euro-dollar rate at 1.35. It reflects the rate we have experienced in January. It reflects the outstanding hedging, and it assumes the month of February and March at 1.36. Guidance for this? The exchange rate? What exchange rate you are assuming in your 10% mid-2015 margin target? This is a step that I will say we have somehow already digested in October, in the sense that when the guidance has been set in December 2012, the reference exchange rate was 1.30. When we have reiterated the guidance and reset the timing to achieve the about 10% in mid-2015, in last October, the reference exchange rate was 1.35. Okay. We plan to grow Q2 over Q1, Q3 over Q4, et cetera, yes. Jerome? One general question, Carlo. We see the industry growing at probably half the rate it used to be, targeting maybe 5% for this year, after three years, more or less flat. Do you think this lack of growth will be a trigger for further consolidation in the industry? If that's your scenario, how STMicro will play into that scenario? Well, it is a big if. It is a big if because this industry did not consolidate. This is also somehow related to the business model and to the fact that the model of the foundry business developed, particularly in Taiwan. This is a model that has somehow decreased the barrier to entry. Because these foundry companies, they are providing services to major companies, but also to small companies. It's true that there are, independently on the manufacturing, there are areas where the R&D is very intense. Let's make an example. When we decided to establish ST-Ericsson, we had major customers pushing for this, and the major customer, of course, was a $2 billion customer for us. We decided not to do this alone because it was too heavy, but to share. This has nothing to do with the fab, and has nothing to do with the silicon technology. It's just the R&D effort that was so massive that we could not withstand alone in ST. I think another driver for consolidation could be the major effort in terms of spending, particularly in areas like smartphone. It's very heavy. My assessment is that we will not see a really much different trend. This is my personal assessment in this business. I know that in ST today, the priority is organic growth and making sure that we land with expenses close to EUR 600 million. Of course, there are areas where our ambition could be to make a step. These are areas now that are in areas where we believe that the business is very stable, where we believe that we would not incur any risks of major swings in the dynamics of the market. But again, this is not on the table. Today, the priority, of course, is to execute our roadmap. Jerome, hold on just a second, please. The merger of TI, National, and Avago and LSI is not a trend that you think could continue and potentially threaten STMicro, because these are your main competitors? Well, I am not sure it is a trend. For sure, there are cases and there will be cases. There is no doubt. But I do not see a significant acceleration of this trend. I think there will be. There will be more cases. The major reason for this is that if you are a small company, even a startup company, you do not have the barrier of investing in manufacturing, because you can use third-party resources to produce your products. This is significant. How can we say? It is an element that is preventing a much stronger and a much rapid consolidation of the business. Then, for sure, there will be cases. You mentioned one. There will be more, for sure. But I am not sure there will be a massive, a real acceleration in this respect. Okay. Didier Khan from IBC. I would like just to have a brief focus on Internet of Things. We believe in IBC that it is going to be a- Something new is going to happen starting from 2040. It will enlarge your addressable market. I think there will be a lot of opportunities for you in this Internet of Things area, but there will be a lot of risk, too. Newcomers, startups, and so on, new things. Do you think that you are well prepared for this big wave that's going to happen? The answer is yes. We are well prepared. We are well prepared because, why? Because Internet of Things is a combination of ingredients. The ingredients are the sensors, the actuators, some intelligence, so microcontroller, connectivity, so Bluetooth Low Energy, for example, and power management, because generally, these kind of devices, they embed a small battery, and we expect a long life, so we need to manage this energy. In some cases, you must embed some energy harvesting devices, too, which is generally based on MEMS also. This combination of the MEMS family, the sensors family, the microcontrollers, low energy, Bluetooth Low Energy, and power management, is putting ST in the best position. Then the devices, because this market of Internet of Things is very wide. There's a number of applications, an unlimited number of applications. But you also need to be there in end-to-end solutions in certain areas like health or something that you- Oh, absolutely. Are you working on that kind of partnership? Yeah, absolutely. The end-to-end solutions are done by our customers. Okay? Because there are wellness, there are healthcare, there are so many applications. And we have partnerships with our customers because we support them beyond only the silicon. Okay? We provide some piece of software. Not the whole software, but the piece of software accompanying this combination of devices. I talked about sensor hub and sensor fusions, because there are many, many sensors, more than one or two or six. It could be now up to 11 or 12 sensors combined. So we must provide this aggregation, the software and the drivers coming with this aggregation. And we work also with the universities and partners because sometimes obviously they don't know exactly what they can do with this combination, and we don't know what is the end-to-end application, so we have to work together. You think you can become the European champion of Internet of Things? Well, I think so. My wish for this new year. I think so because, it is always better to see what you have today and what your customers are buying from you today. I have a very, I think, is mid-size customer, but I think he is a very successful customer. And I believe we can mention because I think we have mentioned in the past, I think it is Fitbit. Yes. This is an example of a customer that is making wearable products. I think they are located in San Francisco, and this is a customer where clearly, the contribution that we can give is the MEMS, so the sensors, but also the very low-power microcontroller and also the connectivity at very low power again, and put everything in a very teeny package, integrating the three pieces of technologies in one package for their solutions. This is a very good example. I believe there are, of course, many, many competitors here, but we have a good base of sensors, a good base of low-power microcontrollers, a good base of low-power connectivity devices, and a good base of power management, and we can integrate all of them from an application point of view, even sometimes in one package. The solution then can be very small and suitable for many portable products. Another area, I think is, for instance, mobile healthcare. This is another area. There are several. The point is, unfortunately, the volume on these things takes time to develop. If you compare a massive smartphone volume with these kinds of products, there is still a very significant gap in terms of volume and also in terms of, let's say, short- and mid-term projection or opportunities. Let's have one more question, Jurgen, and apologies for the other questions, but given the time, I'm sure. Carlo wants to do two. Thank you. Absolutely. Then we have the break, of course. We have the break. We have lunch. Jurgen, please. I can speed up. What could you do to your portfolio, assuming that you realize in the second half, macro is not playing out that well or new competition is coming up? What we could do to our portfolio? Listen, this is not the moment to. Of course, we always need to have backup plans, and I think we have backup plans. It is very important, for sure, to have backup plans in terms of, for instance, the 12-inch activity. This is the best example, because, of course, the 12-inch activity is a very important investment, and I would not rely our growth strategy just on one technology family. What we are doing and what we have been doing is to expand the product portfolio that we have in Crolles and to make sure that it is balanced between logic, for instance, and non-volatile memories or imaging. But in Crolles, non-volatile memories is becoming more and more important, both for MMS but also for APG. This is a good example how we have defined our strategy one year ago. The focus, of course, is to make sure that we succeed. We have identified five product lines. We want to focus on these product lines. And today, I believe that we have the traction with the customers, including in DCG, to make it happen. I think it is important that we remain flexible. It is important that we go down with our expenses close to 600 million. It is important that in Crolles, we have the flexibility to produce much more microcontrollers and less logic, or vice versa. But today, we have a strong commitment, of course, to execute on the roadmap. But on the strategy that we have defined that is calling for leadership, at the end of the day, is about product leadership on these five product lines. Okay. Thank you. We will move to the last question of the plenary, and we will move to lunch. Thank you very much. I have three very quick questions, actually. First one is on Internet of Things. Could you please quantify broadly the exposure at the group level of the whole team of the Internet of Things, please? That would be helpful. That is the first question. Here we go. I will let you. You have quantified. No. I think it is We should have went to lunch. No, I think we have really made an effort to quantify wearable. You understand it's not easy to quantify Internet of Things because it is very variegated. It's many different things. It's clearly about network of smart sensors. There is no doubt that this network of smart sensors can be used in a variety of applications. For instance, they can be used in healthcare, they can be used in wearable, they can be used in industrial control, they can be used even in the car. So it is really a variety of applications. So it's very difficult to quantify all of this. I will say also, somehow, we need to be careful that we do not double count, because at the same time, we project our automotive customers' forecast. But clearly, we are working on this, and one exercise that we have done seriously in the company is really to look at the wearable products. That is one of the parts of Internet of Things. It's very interesting because basically, you can move, you have a kind of personal hub, maybe in your shoes, and then you communicate everything, including the network of sensors that we have on your body with a personal hub, and then the personal hub is connected to any kind of data center. But we have done, I think, Carlo, you may report if you remember. I do not know. No, I do remember as really this is a great opportunity in respect to demands. As Giorgio said, it's a great opportunity for our positioning, given ability of storing, processing, sensing, and communicating our technologies. At the end of the day, what really is a bottom up from our product groups and our regional network we have quantified is an opportunity in the range of $250 million-$300 million revenues in the horizon of 2015. Okay, thanks. The second one, very quick as well. Three on the set-top box business. Can you make a quick comment on competition? Your biggest competitor is probably Broadcom in the U.S. How do you feel they're reacting to your kind of comeback on the market, especially in the U.S.? I think we've heard that Qualcomm was talking about entering the business. Is that a threat for you or not? Thanks. Well, I never visited so many operators like in the last three months. I believe there is a very strong traction on our new Arm-based products. This traction is for satellite, this traction is for fiber to the home, this traction is for cable. We have got the certification from the CableLabs in the United States on the DOCSIS 3.0. I think it is a good momentum for ST in terms of design wins. We respect our competitors. I think we have put a major effort here. The major effort is, of course, also thanks to some additional resources coming from ST-Ericsson and the fact that we have decided not to be in the digital part of wireless. The U.S. market is a big market here. It is a market that is in the range of $1.3 billion. In the past, our participation in this market was basically through one customer, but not on this business model, on the business model to make ASICs for them, and they developed the platform, and we can say the customer was Scientific Atlanta. But then with the transition, with the acquisition by Cisco, the business model changed, and we had to revisit our strategy and to make sure that we have a full platform for this market. We started with Arm, with Orly. Now there are many more ingredients. There is the MoCA, there is the DOCSIS 3.0, there will be the DOCSIS 3.1. We can cover the 4K. Finally, we won. We won important operators, major operators, both in the U.S. for cable and in Europe for satellite, with this new class of products. We are very determined to win here because, as we said, it is thanks to this and thanks to the FD-SOI pervasiveness in the consumer arena that we want to double our DCG business. Yeah. The very last question is regarding OpEx reduction. You mentioned that you could do more on both to both front end products. Should we expect another wave of OpEx or another plan of cost saving? Thanks. We exit Q4 with 656 million of R&D plus SG&A and 28 million of grants, so a net of 626. We said earlier, this is now in the mid of the range, and we are working, and we will go towards the low end of the 600 million to 650 million net OpEx range. This will be a combination of some further reduction in gross OpEx, plus the advantage of the grants to fully kick in our P&L in a systematic way. Okay. I think with that, we'll close the formal plenary session. We'll head to the lunch, which is right outside and to your right. Also, we do have some other senior executives from the regions and other groups, so please enjoy. Thank you for attending.

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