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Wed, Jul 21, 2004 - Page 12 News List

Infineon announces surprise quarterly loss on US probe

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Infineon Technologies AG, Europe's second-largest semiconductor maker, had an unexpected quarterly loss as it set aside more money for potential fines tied to a US antitrust investigation into industry price fixing.

The net loss narrowed to 56 million euros (US$70 million), or US$0.08 a share, in the third quarter through last month, from 116 million euros, or US$0.16, the Munich-based company said.

Provisions for the probe rose to 212 million euros from 28 million euros. Infineon had a profit of 107 million euros excluding the charge.

"Nobody knows what the downside from the investigations may be -- that'll remain an uncertainty," said Matthias Maus, an analyst at Frankfurt Trust Investment, which counts Infineon shares among US$15 billion it manages.

"Operating numbers were better than expected, which reflects the industry up-cycle," he said.

Infineon, which yesterday said sales and revenue will rise in the current quarter, has benefited since the beginning of last year from rising prices for dynamic random access memory (DRAM) chips used in personal compu-ters. Two-fifths of Infineon's sales comes from its memory unit, which contributed the most to the 2 billion euros in losses that the company racked up between 2001 and last year.

Sales in the third quarter rose 30 percent to 1.91 billion euros.

The charge "masks the results of what was otherwise a very successful quarter for us," said Max Dietrich Kley, who is heading Infineon until Wolfgang Ziebart starts as chief executive later this year.

"For the fourth quarter of fiscal year 2004, we expect continued overall growth in revenue and earnings," he said.

Landesbank Rheinland-Pfalz analyst Thomas Hofmann lowered his rating on the stock to "market performer" from "outperformer" after the earnings report, citing concern about the ongoing investigation.

He called the provisions a "bitter disappointment."

The US Justice Department since June 2002 has been probing whether Infineon conspired with competitors Micron Technology, Samsung Electronics Co and Hynix Semiconductor to manipulate computer-chip prices.

The department is investigating whether the four chipmakers tried to manipulate prices in the spot market for chips.

About 80 percent of memory chips are sold in contracts with computer manufacturers and the remainder is traded on spot markets in Asia and the US.

The memory-chip unit, at which Infineon is reducing costs with so-called 110-nanometer technology and partnerships in Asia, had an operating loss of 50 million euros, which included the charges for the probe.

That compares with an operating profit of 3 million euros a year earlier.

The average spot price for the 256-megabit, 333-megahertz double-data-rate DRAM, the most widely used memory chip, was up a fifth at about US$4.80 in the second quarter from a year earlier.

Infineon has said it wants to push the average cost to produce each memory chip to less than US$4 by the end of September.

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