PRESS RELEASE: Infineon reports results for the third quarter and provides outlook for the fourth quarter of the 2008 fiscal year
Infineon Technologies AG / Quarter Results 25.07.2008 Release of a Corporate News, transmitted by DGAP - a company of EquityStory AG. The issuer / publisher is solely responsible for the content of this announcement. =-------------------------------------------------------------------------- Infineon reports results for the third quarter and provides outlook for the fourth quarter of the 2008 fiscal year THIRD QUARTER 2008 RESULTS (April 1 to June 30, 2008) <pre> in Euro million Q3 FY08 Q2 FY08 +/- Revenues 1,029 1,049 (2%) Infineon EBIT 71 36 97% Income (loss) from continuing operations 45 19 +++ Income (loss) from discontinued operations, net (637) (1,390) 54% of tax Net loss (592) (1,371) 57% in Euro Basic and diluted earnings (loss) per share from 0.06 0.03 +++ continuing operations Basic and diluted earnings (loss) per share from (0.85) (1.85) 54% discontinued operations Basic and diluted loss per share (0.79) (1.82) 57% </pre> Neubiberg, Germany - July 25, 2008 - Infineon Technologies AG (FSE/NYSE:IFX) today reported results for the third quarter of the 2008 fiscal year, ended June 30, 2008. Infineon's revenues in the third quarter of the 2008 fiscal year were Euro 1,029 million, down two percent sequentially and up two percent year-over-year. The sequential decline reflects a decrease of revenues in the Automotive, Industrial & Multimarket segment. Excluding effects from currency fluctuations, primarily between the U.S. dollar and the Euro, and acquisitions and divestitures, revenues increased one percent sequentially and six percent year-over-year. Infineon EBIT was Euro 71 million in the third quarter, up from Euro 36 million in the prior quarter. Infineon EBIT in the third quarter included a net gain of Euro 41 million, mainly in connection with the sale of the Hard Disk Drive (HDD) business to LSI. Infineon EBIT in the third quarter also included Euro 7 million for the amortization of acquisition-related intangible assets related mainly to the business acquired from LSI. Infineon EBIT in the second quarter included net charges of Euro 8 million, and Euro 5 million in amortization of such acquired intangible assets. For additional detail on net gains and charges included in Infineon EBIT, please see the table on page 9 in the quarterly information at http://www.infineon.com. Net income from continuing operations for the third quarter was Euro 45 million, resulting in basic and diluted earnings per share of Euro 0.06. For the second quarter, net income from continuing operations was Euro 19 million, and basic and diluted earnings per share were Euro 0.03. The net loss from discontinued operations was Euro 637 million for the third quarter. This loss included Infineon's share in Qimonda's net loss, as well as charges of Euro 411 million from the write-down of Qimonda to its estimated fair value less costs to sell. Basic and diluted loss per share from discontinued operations was Euro 0.85. For the third quarter, Infineon reported group net loss of Euro 592 million, and basic and diluted loss per share of Euro 0.79. The Automotive, Industrial & Multimarket segment reported in the third quarter of the 2008 fiscal year revenues of Euro 712 million, down 4 percent sequentially and 5 percent year-over-year. The sequential decline was mostly due to the impact of the weakening U.S dollar, the weak U.S. automotive business and the deconsolidation of the HDD business, effective April 25, 2008. Excluding the effects of currency fluctuations, primarily between the U.S. dollar and the Euro, and acquisitions and divestitures, segment revenues decreased one percent sequentially and rose five percent year-over-year. Segment EBIT was Euro 106 million compared to Euro 69 million in the second quarter. Included in the segment's EBIT for the third quarter of the 2008 fiscal year was a net gain of Euro 43 million, primarily resulting from the sale of the HDD business to LSI. Net gains and charges included in the segment EBIT for the second quarter were negligible. In the third quarter, Infineon has acquired Primarion, a digital power company headquartered in California. In the Communication Solutions segment revenues in the third quarter of the 2008 fiscal year were Euro 313 million, up 4 percent compared to the prior quarter and up 21 percent year-over-year. Excluding the effects of currency fluctuations, primarily between the U.S. dollar and the Euro, and the contributions from the mobile phone business acquired from LSI and the DSL CPE activities acquired from Texas Instruments, segment revenues increased eight percent sequentially and nine percent year-over-year. Segment EBIT for the third quarter was negative Euro 30 million, compared to negative Euro 29 million in the prior quarter. Despite the positive effect of the revenue increase, segment EBIT was held back by customization expenses relating to the ramp of new mobile phone platforms. Segment EBIT contained no significant net gains or charges in either quarter. Included in the segment EBIT for the third quarter was amortization of acquired intangible assets of Euro 7 million relating mainly to the mobile phone business acquired from LSI, compared to Euro 5 million for the second quarter. Qimonda: In preparation for the ultimate disposal of Qimonda AG, Infineon has reclassified the assets and liabilities of Qimonda as held for disposal in its condensed consolidated balance sheets beginning on March 31, 2008. With this decision, the individual line items in the condensed consolidated statements of operations on page 8 of the quarterly information reflect Infineon's continuing operations without Qimonda. All results relating to Qimonda are reported in the line item 'Income (loss) from discontinued operations, net of tax'. For the third quarter, the net loss from discontinued operations was Euro 637 million. This loss included Infineon's share in Qimonda's net loss, as well as charges of Euro 411 million from the write-down of Qimonda to its estimated fair value less costs to sell. Basic and diluted loss per share from discontinued operations was Euro 0.85 for the third quarter. Infineon's beneficial ownership interest in Qimonda as of June 30, 2008 was 77.5 percent. INFINEON'S COST-REDUCTION PROGRAM IFX 10+ Addressing rising risks in the current market environment, adverse currency trends as well as below benchmark margins, Infineon has implemented its cost-reduction program 'IFX10+' in the third quarter of the 2008 fiscal year. From the third quarter of the 2008 fiscal year to the fourth quarter of the 2009 fiscal year, assuming a continuation of current market conditions and an exchange rate of U.S. dollar 1.55 against the Euro, IFX10+ is expected to yield at least Euro 200 million of annualized savings. To achieve those cost savings, measures have been defined in the following areas: - Product portfolio management to eliminate unprofitable or insufficiently profitable product families and to increase efficiency in Research & Development(R&D) - Reduction of manufacturing costs and optimization of the value chain - Improved efficiency of processes and tasks in the fields of G&A, R&D and marketing & sales - Re-organization of the company's structure along its target markets. Effective October 1, 2008, Infineon will be organized into five divisions: Automotive, Chipcard & Security, Industrial & Multimarket, Wireline Communications and Wireless Solutions. Taking into account the levels of risk in the current market conditions, the adverse foreign exchange rate development and the requirements of the re-organization of the company, headcount reductions will be inevitable. Infineon must adapt its size to today's market conditions. In the course of the implementation of these measures, it will be necessary to reduce headcount by a gross figure of approximately 3,000 employees. This figure refers to all sites, functions and levels across the company. 'Third quarter results illustrate that we are driving growth and margins in our core business. On a year-over-year comparison, both revenues and Infineon EBIT improved, despite a 21 cent weakening of the U.S. dollar against the Euro', said Peter Bauer, CEO of Infineon Technologies AG. 'As we seek to continue on this path despite adverse exchange rate trends and increasing risks in the overall economic environment, we have implemented our IFX10+ cost-reduction program and have accelerated all activities of cost reduction and margin improvement. Within five quarters, we expect to realize at least Euro 200 million in annualized savings that should pave the way for continued profitability and EBIT margin improvement.' OUTLOOK FOR THE FOURTH QUARTER OF THE 2008 FINANCIAL YEAR For the fourth quarter of the 2008 fiscal year, Infineon expects revenues to increase by a mid single-digit percentage compared to the third quarter. However, the company notes that market risks in general are likely to rise and that the persistent weakness of the U.S. dollar against the Euro is adding to normal price declines in the company's markets. The company anticipates Infineon EBIT, excluding net gains or charges, to remain stable or decline slightly. Infineon EBIT in the fourth quarter will include temporarily increased costs, as shipments of DRAM wafers out of Infineon's 200-millimeter wafer facility in Dresden, Germany, to Qimonda came to an end in the third quarter. In connection with the company's IFX10+ cost-reduction program, the company expects to record significant net charges in the fourth quarter. Automotive, Industrial & Multimarket (AIM): In the fourth quarter of the 2008 fiscal year, Infineon expects revenues of its Automotive, Industrial &
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