Pasquale Pistorio, President and Chief Executive Officer, commented, "As anticipated, market conditions further deteriorated in the third quarter, with pricing pressures driven by industry overcapacity negatively affecting virtually all of ST's product families. During this time, we believe that ST's revenue performance was in line with the overall industry average. However, we believe we gained market share in our targeted applications, as illustrated by the strength of the Company's differentiated product sales."

Differentiated product sales were the major contributors in the 2001 third quarter, accounting for 69.6% of the period's net revenues. Logic and Memories were $202.3 million, representing 14.4%, of net revenues, after a 33.4% sequential sales decline. Discretes were $142.2 million (10.2% of net revenues) and Standard and Commodities were $81.9 million, 5.8% of net revenues), after posting sequential sales declines of 18.1% and 4.7%, respectively.

Mr. Pistorio continued, "I am pleased to report that ST was able to post significant sequential declines in SG&A costs and non-core R&D expenditures, which aggregated $62.5 million. These savings resulted from the cost control programs, hiring freeze and optimization activities that were initiated earlier in the year."

ST is reviewing its strategy with respect to the Company's more mature 6" wafer fabs. On May 31, 2001, ST announced the planned closing of its Ottawa fab and the transfer of the related front-end wafer production to its other facilities around the world. With the aim of reducing product costs, the Company has initiated a plan for the closure of its 6" plant in Rancho Bernardo, California. Therefore, in addition to the impairment charge taken in the second quarter relating to this facility, ST accrued a further $23.3 million in impairment charges in the 2001 third quarter.

Future actions may include the sale, wafer production curtailment or closure of other similar facilities.