Electronics Production | January 24, 2005

Infineon sales down 9%

First quarter revenues were Euro 1.82 billion, down 9 percent sequentially, reflecting reduced sales volumes in all segments.
Net income in the first quarter was Euro 142 million, up from net income of Euro 44 million sequentially; first quarter EBIT increased to Euro 211 million from Euro 113 million in the prior quarter. Results of both quarters were affected by non-recurring effects.

In the first quarter of financial year 2005, Infineon Technologies AG reported a sequential revenues decrease in each of its business segments. Sales volumes in the three logic segments declined mainly due to lower demand driven by inventory corrections by customers. Although bit production increased slightly in the Memory Products segment, overall sales volumes declined. The segment has increased inventory levels back to normal levels to serve customers more efficiently and flexibly in the future.

Excluding the impact of non-recurring license income of Euro 118 million resulting from the settlement with ProMOS in the first quarter and the impact of impairment and antitrust related charges of Euro 132 million in the prior quarter, EBIT declined in all segments except the Wireline Communications segment. The company’s comparable EBIT decrease was primarily driven by lower sales volumes, and lower fab utilization in the Secure Mobile Solutions and Automotive & Industrial segments. Results were also negatively impacted by the decline of the US dollar.

“As anticipated in our outlook from last quarter, we have seen a slowdown in most of our application segments, a further clear market weakening and lower customer demand during the first quarter,” said Dr. Wolfgang Ziebart, CEO and President of Infineon Technologies AG. “We have thus taken necessary measures to adjust inventory levels, which negatively impacted our first quarter’s results.”
Based on the ordering behavior of Infineon’s customers and forecasts of market research institutes, Infineon anticipates a continued slowdown in demand in the overall worldwide semiconductor market during the second quarter of financial year 2005. Due to seasonal effects, pricing pressure in all of the company’s application segments, and a further decline in demand as customers continue to adjust inventory, the company expects revenues and earnings in the current quarter to decline further.

“While many of the measures we have taken to improve our competitiveness are a real challenge for our company in the short term, they are necessary in order to secure our mid and long term future,” commented Dr. Ziebart. “We have further tightened the control on cost, investment and working capital and have identified fixed cost reductions of Euro 200 million for the 2005 financial year compared to the original plan.”


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