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Chip Maker Sees Rebound Coming

January 22, 2002

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FRANKFURT, Germany (AP) _ The head of struggling Infineon AG, Europe’s second-largest chip maker, said Tuesday that the global market for computer memory may be turning round after a dizzying fall last year, but warned that the German company could post another big loss this year.

``There are still no clear signals for a sustained market recovery, but the first green shoots are visible,″ chief executive Ulrich Schumacher said. ``We are looking with some cautious optimism into the future.″

Schumacher, addressing shareholders at their annual meeting, cited predictions that worldwide chip sales would increase by 4 percent this year after a decline of more than 30 percent decline. That fall led to bloated inventories and rock-bottom prices that hurt Infineon and rivals such as Toshiba Corp. and Micron Technology Inc.

A subsequent sharp drop in supply has since helped prices to rise from less than $1 to more than $3 for a standard 128-megabit chip, Schumacher said, though the chips are still being sold below cost. At the peak of the tech boom, 128-megabit chips sold for around $15.

Among Infineon’s other major customers, Schumacher said that the cell phone industry was also showing ``the first signs of a moderate recovery″ while the company’s automotive business still faced a ``difficult″ market.

Schumacher’s remarks helped Infineon shares rise 3.5 percent in Frankfurt.

That more than made up for a 2.3 percent drop on Monday, when Infineon announced an operating loss of 1.02 billion euros ($890 million) for its 2001 fiscal year which ended Sept. 30. The shares have almost doubled in value from a low in September.

Schumacher warned Tuesday that the loss could widen in the current fiscal year. Analysts’ forecasts for a deficit of about 1.4 billion euros ($1.2 billion) were realistic, he said.

Still, company spokeswoman Katja Schlendorf said those forecasts were based on outdated price figures and would likely be revised to indicate a smaller loss.

Operating figures exclude financial items such as interest, taxes and one-time losses and gains, and are viewed by some analysts as the best clue to a company’s strength.

Infineon has been trying to find a partner to cut costs and boost market share. Talks with Toshiba about a venture came to nothing after Micron agreed to buy the Japanese firm’s U.S. memory-chip business.

The company posted a net loss of 331 million euros ($291 million) and an operating loss of 564 million euros ($498 million) for the three months through December.