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STMicroelectronics Not Fit To Take On The Competition

by Seeking Alpha, Mar. 30, 2015 – 

Semiconductor companies have taken a beating along with the broader market for the past week and CNBC's Jim Cramer recently highlighted the names he believes will be outperforming the industry. The list included companies such as Skyworks Solutions (NASDAQ:SWKS) and Cypress Semiconductor Company (NASDAQ:CY), both viable long positions to take advantage of the growing smart device industry. The semiconductor industry will be seeing solid growth numbers in 2015 - the demand is predicted to increase by 5.4%, reaching $358 billion in annual sales according to Gartner, Inc. Although the growth momentum is down from previous years, the trend is still solid and the fundamental demand for smart devices remains strong.

Even though the fundamental industry indicators are sound, there are still few companies that do not manage to keep up with the competition and are yet to be priced accordingly by the markets. One such company is STMicroelectronics (NYSE:STM), which has been losing revenue with a predictable consistency and is trading well above the fair value.

STMicroelectronics at first glance looks like a solid microchip maker with an impressive product line, but a quick look at the numbers suggest otherwise. With $7.4 billion in revenue and rich product portfolio one could consider it to be among the market leaders but the consistently declining revenue and low profit margins point to fundamental problems.


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