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Electronics Production | July 25, 2007

Qimonda posts Q3 loss

German based Qimonda achieved net sales of Euro 740 million in the third quarter of FY 2007, a decline of 24 percent from Euro 977 million year over year and a decline of 25 percent from Euro 984 million quarter over quarter.
Third quarter FY 2007 EBIT was a loss of Euro 323 million compared to positive EBIT of Euro 100 million in the third quarter of FY 2006 and positive EBIT of Euro 85 million in the second quarter of FY 2007. Net loss in the third quarter was Euro 218 million compared to net income of Euro 54 million in the third quarter of FY 2006. In the second quarter, net income was Euro 57 million and earnings per share was Euro 0.17.

For the first nine months of FY 2007, Qimonda's net sales were Euro 2.9 billion, an increase of 12 percent compared to the same period last year. EBIT for the first nine months of the current financial year was Euro 12 million compared to an EBIT loss of Euro 2 million in the same period of the previous financial year. Net income in the first nine months of FY 2007 amounted to Euro 16 million compared to a net loss of Euro 82 million in the first nine months of FY 2006.

“In the June quarter, the industry saw a sharp price decline for standard DRAM products, where PC contract prices dropped almost 60 percent quarter over quarter," said Kin Wah Loh, President and CEO of Qimonda. "Our diversified DRAM product portfolio helped limit our average selling price decline to 40 percent quarter over quarter. Although we have seen some price improvement in July, as we enter the typically stronger second half of the calendar year, we are taking several actions to improve our financial performance. For the current financial year, we are limiting our capital spending and expect to be around Euro 900 million, at the low end of our previously announced range. For the next financial year, we are significantly cutting capital spending plans down to a range of Euro 650 million to Euro 750 million. We are focusing on productivity improvements and expect to convert more than 50 percent of our capacities to 80nm and 75nm by the end of calendar year 2007 while growing our 300mm share to 80 percent. In addition, we are curtailing our operating expenses for the current financial year and expect to save about Euro 30 million compared to our previous plans."

On a year-over-year basis, Qimonda's quarterly net sales decreased mainly due to a strong decline in average selling prices as well as a weaker US dollar. These effects were not entirely offset by the 56 percent growth in bit-shipments. Quarter over quarter, net sales decreased mainly due to a 40 percent decline in average selling prices and a weaker U.S. dollar. This decrease, however, was only partially offset by the strong 28 percent growth in bit-shipments and a fairly stable shipment share to non-PC applications of almost 50 percent.

In the third quarter of FY 2007, Qimonda generated 33 percent of its net sales in North America, 16 percent in Europe, 31 percent in Asia Pacific and 20 percent in Japan.

Gross margin and net income year over year and quarter over quarter were negatively affected by the DRAM price development and a weaker U.S. dollar. These effects could not be offset by higher bit-shipments and improved manufacturing productivity. The sharp decline in prices for standard DRAM products resulted in inventory write-downs of Euro 66 million in the quarter, which further negatively impacted gross margin and profitability.

Cash flow from operations declined to Euro 45 million in the third quarter FY 2007. Capital expenditures were Euro 236 million, mainly for the further expansion of the Richmond 300mm wafer manufacturing facility and equipment upgrades for the further conversion towards the 75nm and smaller DRAM technologies. In addition, the company fully repaid the remaining Euro 48 million balance of the Infineon shareholder loan. At the end of the third quarter of FY 2007, the company's gross cash position was Euro 892 million and its net cash position was Euro 743 million.

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