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Chip Maker Infineon Posts Quarterly Loss

April 22, 2003

FRANKFURT, Germany (AP) _ Infineon Technologies AG, the world’s third-largest chip maker, on Tuesday announced an unexpectedly large loss for its latest quarter, a period in which prices for computer chips dipped below what it cost to make them.

The company lost 328 million euros ($354 million) for the quarter ending March 31. It was its eighth straight quarterly loss and more than three times its loss of 108 million euros a year earlier. Sales rose 13 percent to 1.48 billion euros ($1.59 billion).

``We have achieved good sales growth and won more market share in a difficult environment,″ chief executive Ulrich Schumacher said. ``We have made considerable productivity gains, which nonetheless could not compensate for the dramatic fall in the price of memory products.″

Infineon sold one of its key products _ 256-megabyte double-data rate computer chips _ for an average of $4.70 during the quarter, while the chips cost $5.40 to make. Market prices fell from $6 to under $3 during the quarter before recovering slightly, the company said.

Computer memory is Munich-based Infineon’s biggest business, though it also makes chips for smart cards such as payphone cards, as well as components for cell phones and cars.

Makers of dynamic random access memory, or DRAM, chips worldwide have suffered losses as companies remain cautious about spending on new computers.

The company’s performance fell short of expectations among securities analysts, who had forecast a net loss of about 137 million euros ($148 million), according to Dow Jones Newswires.

Infineon shares were down 4.9 percent at 7.16 euros ($7.80) in afternoon trading in Frankfurt.

``It’s the price of DRAM, it’s as simple as that,″ said analyst Michael Bahlmann at M.M. Warburg in Hamburg. ``Everyone in the business has had to live with these prices.″

The company’s profit in the quarter also was hurt by one-time costs of 157 million euros ($170 million), which included expenses related to acquisitions, restructuring and reductions in the value of inventory.

The result for the quarter _ the company’s second fiscal quarter _ contrasted with the last three months of 2002, when the company lost 40 million euros.

On Tuesday, the company said making a forecast about when business would finally pick up was difficult, but that it had seen a ``positive trend in demand″ in the past three months. ``We expect a continuation of this positive development,″ the company said.

The only Infineon division that showed an operating profit was the automotive and industrial division, which had earned 49 million euros ($53 million) before interest and taxes on sales of 354 million euros ($386 million).

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