SGS-THOMSON Microelectronics REPORTS 32% INCREASE IN FIRST QUARTER REVENUES

St Genis, France, April 17, 1996

SGS-THOMSON Microelectronics today announced financial results for the first quarter ended March 30, 1996.

Net revenues totaled $1.03 billion for the three months ended March 30, 1996, up 32% from first quarter 1995 net revenues of $778.6 million. Net revenues in the first quarter of 1996 increased 5.4% on a sequential quarterly basis, when compared to net revenues of $974.7 million for the three months ended December 31, 1995.

Net earnings for the first quarter of 1996 rose 64% to $175.0 million, up from $106.9 million for the first quarter of 1995. On a per share basis, earnings totaled $1.26 in the 1996 first quarter, compared to $0.83 per share in the year-ago quarter. The weighted average number of shares outstanding was 138.4 million, compared to 128.6 million in the corresponding 1995 period. The Company attributed the significant increase in net income primarily to higher net revenues, combined with strong margins. Net earnings also benefited from one time positive gain of $7.3 million, before tax, arising from the sale of a distribution subsidiary in France.

The gross profit margin was 42.9% in the first quarter of 1996, compared to 42.0% in both the first quarter and fourth quarter of 1995. For the three months ended March 30, 1996, operating profit totaled $220.7 million, an increase of 55% over first quarter 1995 operating profit of $141.7 million. The operating profit margin in the 1996 first quarter was 21.5%, compared to 18.2% in the year-ago quarter and 19.0 % in the fourth quarter of 1995.

Mr. Pasquale Pistorio, President and Chief Executive Officer of SGS-THOMSON, commented, "SGS-THOMSON had an outstanding quarter. Our sales were up in comparison to both the year ago quarter and on a sequential quarterly basis. Both our Dedicated Products Group and our Programmable Products Group posted sharply higher revenue growth. Specifically, Dedicated Products revenues rose 48% and Programmable Products increased 43%, bringing total revenues from Differentiated Products to 56% of total first quarter revenues. We posted a very strong gross profit margin. Further, with our tight control on operating expenses we recorded an operating profit margin of 21.5% - the highest in our company's history."

"Our results for the quarter were also up compared to the fourth quarter of 1995, with revenues rising 5.4%, and operating profit increasing almost 19%."

"From a geographic standpoint, Asia Pacific continued its strong growth, with revenues up 58% compared to the 1995 first quarter. Although Japan represented just under 6% of first quarter 1996 revenues, we are pleased to report that sales more than doubled in Japan compared to the 1995 first quarter."

Mr. Pistorio continued, "We believe our product portfolio strategy, with the focus on Differentiated Products, has enabled us so far to offset most of the softness we are experiencing in certain commodity products. Further we believe that our strategy of diversification and balance - by product family, by end market application and by geographic reach - are distinguishing characteristics of SGS-THOMSON. As we enter the second quarter of 1996, I would note that SGS-THOMSON continues to be capacity constrained in most of our leading product families."

During the first quarter, SGS-THOMSON continued its policy of horizontal and vertical partnerships. Specifically, it has concluded a licensing agreement for its ST20 32-bit micro core and the D-950 DSP core with a leading Asian semiconductor supplier. SGS-THOMSON also expanded its portfolio of cores, with the introduction of a fully compatible 486 core that customers can integrate into their own designs.

The company passed two important milestones in product deliveries during the quarter - the one billionth smartcard IC and the five millionth MPEG decoder IC were both shipped, underlining the company's leadership positions in these two important product areas.

Research and Development expenses in the 1996 first quarter totaled $121.4 million, or 11.8% of net revenues. In the year-ago quarter, research and development expenses totaled $97.5 million, or 12.5% of net revenues.

Selling, general and administrative expenses were $106.1 million, or 10.3% of net revenues in the first quarter of 1996, compared to $90.7 million, or 11.6% of net revenues in first quarter of 1995.

The effective tax rate in the first quarter of 1996 was 23.2%, compared to 23.0% for the three months ended April 1, 1995.

At March 30, 1996, cash, cash equivalents and marketable securities totaled $534.7 million. Total debt was $408.8 million, including $206.5 million of long-term debt. The company's net financial position was $125.9 million at March 30, 1996.

Shareholders' equity was $ 2.84 billion at March 30, 1996.

SGS-THOMSON Microelectronics is a global independent semiconductor company listed on the New York Stock Exchange and on the Bourse de Paris. The company designs, develops, manufactures and markets a broad range of semiconductor integrated circuits (ICs) and discrete devices used in a wide variety of microelectronics applications, including telecommunication systems, computer systems, consumer products, automotive products and industrial automation and control systems.

For further information contact:
Investors Relations
Francois Guibert
Group Vice-President,
SGS-THOMSON Microelectronic
Business Planning & Development
St. GENIS POUILLY CEDEX (FRANCE)
phone: +33 4 50-40 25 59
fax : +33 4 50-40 25 80

Press Relations
Maria Grazia Prestini
Corporate Press Relations Manager
SGS-THOMSON Microelectronics
phone: +33 4 5040 2532 St. Genis Pouilly Cedex (France)
+39-39-603 5901 Agrate Brianza (Italy)
fax : +33 4 5040 2860 St. Genis Pouilly (France)
+39-39-603 6094 Agrate Brianza (Italy)

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