Infineon Technologies AG

Earnings Release • Jul 25, 2008

News Details

Corporate | 25 July 2008 07:30

Infineon reports results for the third quarter and provides outlook for the fourth quarter of the 2008 fiscal year

Infineon Technologies AG / Quarter Results

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)

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%

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 &
Multimarket segment to increase by a mid single-digit percentage compared
to the third quarter. The increase will be driven mostly by normal
seasonality in the industrial & multimarket business. Segment EBIT margin
is expected to be in the range of 9 to 10 percent, excluding net gains or
charges. Revenues in the segment’s Automotive business are expected to
remain broadly unchanged compared to the third quarter despite continued
weakness in the U.S. automotive market. Revenues in the Industrial &
Multimarket business are anticipated to increase. Results in the Security &
ASICs business are anticipated to increase slightly compared to the prior
quarter, driven by the chip card IC business. The ASIC business is expected
to remain flat sequentially.

Communication Solutions (COM): In the fourth quarter of the 2008 fiscal
year, revenues in the Communication Solutions segment are expected to
increase to a range of Euro 330 million to Euro 350 million. This increase
reflects mainly the continued ramp-up of the company’s HSDPA mobile
platform solutions. The broadband business is anticipated to remain broadly
unchanged compared to the third quarter. Segment EBIT loss, excluding net
gain or charges, is expected to improve, driven by the revenue increase.

Other Operating Segments and Corporate and Eliminations: In the fourth
quarter, Infineon expects revenues in Other Operating Segments to decline
compared to the third quarter as shipments of DRAM wafers out of Infineon’s
200-millimeter wafer facility in Dresden to Qimonda came to an end in the
third quarter. EBIT excluding net gains or charges for Other Operating
Segments and Corporate and Eliminations combined is anticipated to be
approximately negative Euro 20 million. Included in the combined EBIT will
be temporarily increased costs in connection with the 200-millimeter wafer
facility in Dresden. In connection with the company‘s IFX10+ cost-reduction
program, net charges are expected to be significant in the fourth quarter.

All figures in this quarterly information are preliminary and unaudited.

ANALYST AND PRESS TELEPHONE CONFERENCES
Infineon Technologies AG will conduct a telephone conference (in English
only) with analysts and investors on July 25, 2008, at 10:00 a.m. Central
European Summer Time (CEST), 4:00 a.m. Eastern Daylight Time (U.S. EDT), to
discuss operating performance during the third quarter of the 2008 fiscal
year. In addition, the Infineon Management Board will host a telephone
conference with the media at 11:30 a.m. (CEST), 5:30 a.m. (U.S. EDT). It
can be followed in German and English over the Internet. Both conferences
will be available live and for download on the Infineon web site at
http://corporate.infineon.com.

Segments’ 2008 third quarter performance and additional major business
highlights can be found in the quarterly information at
http://www.infineon.com.

IFX FINANCIAL CALENDAR (*preliminary date)
- Dec 03, 2008* Earnings Release for the Fourth Quarter and Full 2008
Fiscal Year
- Feb 12, 2009* Annual General Meeting of Shareholders

New in the IFX podcast section at www.infineon.com/podcast
- Fixed Mobile Convergence
- Exploring exposure: sophistication of the exposure process in the
semiconductor industry

D I S C L A I M E R
This discussion includes forward-looking statements about our future
business. These forward-looking statements include statements relating to
future developments in the world semiconductor market, including the market
for memory products, Infineon’s future growth, the benefits of research and
development alliances and activities, our planned levels of future
investment in the expansion and modernization of our production capacity,
the introduction of new technology at our facilities, the continuing
transitioning of our production processes to smaller structure sizes, cost
savings related to such transitioning and other initiatives, our successful
development of technology based on industry standards, our ability to offer
commercially viable products based on our technology, our ability to
achieve our cost savings and growth targets, and any potential disposal of
our interest in Qimonda. These forward-looking statements are subject to a
number of uncertainties, including trends in demand and prices for
semiconductors generally and for our products in particular, the success of
our development efforts, both alone and with our partners, the success of
our efforts to introduce new production processes at our facilities and the
actions of our competitors, the availability of funds for planned expansion
efforts, the outcome of antitrust investigations and litigation matters,
the success of any corporate activities we may undertake with respect to
our interest in Qimonda, as well as the other factors mentioned herein and
those described in the 'Risk Factors' section of the annual report of
Infineon on Form 20-F filed with the U.S. Securities and Exchange
Commission on December 7, 2007. As a result, our actual results could
differ materially from those contained in the forward-looking statements.
Infineon does not intend or assume any obligation to update or revise these
forward-looking statements in light of developments which differ from those
anticipated.

Contact:
Investor Relations, Tel.: +49 89 234-26655, Fax: +49 89 234-9552987

25.07.2008 Financial News transmitted by DGAP

Language: English
Issuer: Infineon Technologies AG
Am Campeon 1-12
85579 Neubiberg
Deutschland
Phone: +49 (0)89 234-26655
Fax: +49 (0)89 234-955 2987
E-mail: investor.relations@infineon.com
Internet: www.infineon.com
ISIN: DE0006231004
WKN: 623100
Indices: DAX
Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr
in Berlin, Hannover, München, Hamburg, Düsseldorf, Stuttgart;
Terminbörse EUREX; Foreign Exchange(s) NYSE

End of News DGAP News-Service

---