Infineon Technologies AG

Earnings Release • Feb 6, 2009

News Details

Corporate | 6 February 2009 07:30

Infineon reports results for the first quarter of the 2009 fiscal year and provides outlook for the second quarter

Infineon Technologies AG / Quarter Results

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Infineon reports results for the first quarter of the 2009 fiscal year and
provides outlook for the second quarter

FIRST QUARTER 2009 RESULTS (October 1 to December 31, 2008)

in Euro million Q1 FY09 Q4 FY08 +/-
Revenues 830 1,153 (28%)
Segment Result (102) 59 ---
Loss from continuing operations (116) (297) 61%
Loss from discontinued operations, net of tax (288) (587) 51%
Net loss (404) (884) 54%
in Euro
Basic and diluted loss per share from continuing (0.16) (0.45) 64%
operations
Basic and diluted loss per share from (0.34) (0.50) 32%
discontinued operations
Basic and diluted loss per share (0.50) (0.95) 47%

Neubiberg, Germany – February 6, 2009 – Infineon Technologies AG (FSE/NYSE:
IFX) today reported results for the first quarter of the 2009 fiscal year
ended December 31, 2008. Infineon prepares its result in accordance with
International Financial Reporting Standards (IFRS).

Infineon’s revenues in the first quarter were Euro 830 million, down 28
percent sequentially and 24 percent year-over-year. The sequential decrease
reflects a decline in revenues in all of the company’s operating segments
due to significantly lower demand as a result of the global economic
slow-down and inventory corrections throughout the electronics
supply-chain. The company’s Automotive and Wireless Solutions segments were
most severely affected. Overall, the company’s revenues were slightly
better than forecasted, largely due to the stronger U.S. dollar against the
Euro. Excluding effects of currency fluctuations, primarily between the
U.S. dollar and the Euro, and acquisitions and divestitures, revenues
decreased 32 percent sequentially and 26 percent year-over-year.

Beginning October 1, 2008, Infineon’s Management Board uses Segment Result
to assess the operating performance of the company’s reportable segments
and as a basis for allocating resources among the segments. Infineon’s
combined Segment Result was negative Euro 102 million in the first quarter,
compared to positive Euro 59 million in the fourth quarter of the 2008
fiscal year. First quarter Segment Result was better than expected as a
result of higher than forecasted revenues and very good progress with cost
reductions under the company’s IFX10+ cost-reduction program. For
additional details, including a definition and a reconciliation of total
Segment Result to 'Operating Income (Loss)' in the condensed consolidated
statements of operations, please see the table on page 7 in the quarterly
information at http://www.infineon.com.

Net loss from continuing operations for the first quarter was Euro 116
million, resulting in basic and diluted loss per share from continuing
operations of Euro 0.16. For the prior quarter, net loss from continuing
operations was Euro 297 million, and basic and diluted loss per share from
continuing operations was Euro 0.45.

The loss from discontinued operations, net of tax, was Euro 288 million for
the first quarter. This loss consisted of Euro 93 million in connection
with the recognition of currency translation effects primarily related to
Qimonda’s sale of its interest in Inotera to Micron and of Euro 195 million
in provisions and allowances following Qimonda’s filing of an application
to open insolvency proceedings. Basic and diluted loss per share from
discontinued operations was Euro 0.34.

For the first quarter, Infineon reported group net loss of Euro 404
million, and basic and diluted loss per share of Euro 0.50.

In line with an overall effort to focus on liquidity management, the
company reduced its investment in property, plant and equipment and
intangible assets, including capitalized development costs to only Euro 40
million for the quarter. In addition, Infineon reduced net working capital
by Euro 79 million. Hence, free cash outflow could be contained to negative
Euro 22 million for the quarter despite cash outflow in connection with the
IFX10+ program of Euro 25 million. The company also repurchased a total
nominal amount of Euro 117 million of its convertible and exchangeable
bonds during the quarter.

SEGMENTS’ PERFORMANCE FOR THE FIRST QUARTER
For segments’ financial results, please see the quarterly information at
http://www.infineon.com.

In the first quarter, revenues in the Automotive segment decreased
significantly compared to the prior quarter due to the worsening global
recession, significant production cuts in the automotive markets worldwide
and resulting inventory corrections at customers. Automotive Segment Result
swung to a loss, mainly due to the significant decline in revenues and the
drop in factory loading, which could only be partially offset by savings
realized under the IFX10+ program.

Industrial & Multimarket segment’s revenues in the first quarter also
decreased significantly sequentially due to the worsening global recession,
a significant slow-down in worldwide demand in the consumer, computing and
telecom markets and resulting inventory corrections in the supply-chain.
Industrial & Multimarket Segment Result remained positive, but decreased
significantly compared to the prior quarter, mainly due to the decline in
revenues and lower production levels, which could only be partially offset
by savings the segment has realized under the IFX10+ cost-reduction
program.

Revenues of the Chip Card & Security segment decreased
quarter-over-quarter, mostly due to inventory corrections at major
customers and seasonal weakness amidst an overall weak demand environment.
Chip Card & Security recorded a slightly negative Segment Result compared
to positive Segment Result in the prior quarter, mainly due to the decline
in revenues which could only be partially offset by the IFX10+ measures.

In the first quarter, revenues in the Wireless Solutions segment decreased
significantly on a sequential basis, mainly due to the drastic market
slow-down and inventory corrections at customers. In particular, one HSDPA
customer reduced demand after its high level of demand in the fourth
quarter of the 2008 fiscal year. Wireless Solutions recorded a negative
Segment Result, mainly due the significant decline in revenues and an
increase in idle cost which could only be partially offset by the measures
the segment has implemented under the IFX10+ cost-reduction program.

The Wireline Communications segment’s revenues in the first quarter
decreased compared to the prior quarter, mostly due to the decrease in
demand reflecting the economic slow-down and inventory corrections in the
supply chain. Wireline Communications Segment Result was positive. Compared
to the prior quarter, Segment Result increased despite lower revenues,
mainly driven by the IFX10+ measures.

QIMONDA
On January 23, 2009, Qimonda AG and its wholly owned subsidiary Qimonda
Dresden oHG filed an application at the Munich Local Court to open
insolvency proceedings. Infineon’s beneficial ownership interest in Qimonda
is 77.5 percent. Following Qimonda’s insolvency filing, Infineon may be
exposed to a number of significant liabilities relating to the Qimonda
business, including pending antitrust and securities law claims, potential
claims for repayment of governmental subsidies received, and
employee-related contingencies. In the first quarter of the 2009 fiscal
year, Infineon has increased its provisions and allowances by Euro 195
million. This amount covers those contingencies that management believes
are likely to occur and can be estimated with reasonable accuracy at this
time. There can be no assurance that such provisions and allowances
recorded will be sufficient to cover all liabilities that may ultimately be
incurred in relation to these matters. Infineon anticipates that the
majority of any potential cash obligations the company may have in
connection with these matters would be payable, if at all, in periods after
the 2009 fiscal year.

Effective March 31, 2008, Infineon reclassified the assets and liabilities
of Qimonda as held for disposal in its condensed consolidated balance
sheets. As a consequence, the individual line items in the condensed
consolidated statements of operations on page 7 of the quarterly
information (www.infineon.com) 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'. The
net book value of Infineon’s interest in Qimonda in Infineon’s condensed
consolidated balance sheet as of December 31, 2008 has been recorded at the
estimated fair value less costs to sell.

INFINEON’S COST-REDUCTION PROGRAM IFX10+
In the first quarter of the 2009 fiscal year, Infineon made very good
progress with cost reductions under the IFX10+ program, mainly in operating
expenses, where the company saved approximately Euro 45 million during the
quarter compared to the expense run-rate of the prior quarter. In that
context, the company has also made progress with regards to headcount
reductions. By the end of December 2008, the company had reached agreements
regarding or had already effected separation with respect to approximately
85 percent of the announced workforce reduction.

In response to continuing weak demand worldwide in all of the company’s
target markets, Infineon has identified additional savings potential from a
combination of measures that have already been implemented or will be
implemented shortly. Amongst others, the company has introduced reduced
work hours in the company’s German production sites Regensburg and Dresden,
has changed its bonus schemes for the 2009 fiscal year and has issued a new
and very stringent travel policy. In addition, Infineon exited the
employers’ union in November 2008 in order to achieve more flexibility in
wage adjustments. Infineon does not expect to incur additional expenses or
cash outflows in relation to the additional measures mentioned above.
Infineon originally announced expected annualized savings of at least Euro
200 million, and then increased this target in December to at least Euro
250 million. As a result of substantial additional cost reductions and cash
savings, including those mentioned above, the company now targets total
annual savings of Euro 600 million. These savings include approximately
Euro 200 million in operating expenses and Euro 400 million savings related
to manufacturing operations. Of the savings in manufacturing operations,
Euro 300 million have been designed to offset at least in part the cost
impact of lower loading of the manufacturing sites caused by the downturn.

In addition to the savings mentioned above, the company is reducing its
2009 fiscal year budget for investment in property, plant and equipment and
intangible assets, including capitalized development costs, to
approximately Euro 200 million, compared to the Euro 250 million that was
originally budgeted.

OUTLOOK FOR THE SECOND QUARTER OF THE 2009 FISCAL YEAR
The drastic slow-down in world economic demand that started in the first
quarter of the 2009 fiscal year is expected to continue to have a severe
impact on overall demand levels in the second quarter. In addition, the
company anticipates that inventory reductions throughout the entire
electronics supply chain will continue. As such, the company has relatively
limited visibility with respect to the revenue development, even in the
second quarter. Within the limits of that low visibility, the company
currently expects revenues from continuing operations for the second
quarter to decrease by approximately 10 percent compared to the first
quarter. After the significant decrease in demand in the Automotive and
Wireless Solutions segments in the first quarter, the company expects these
segments to be more resilient in the second quarter compared to the first
quarter. By contrast, the three other segments, Industrial & Multimarket,
Chip Card & Security and Wireline Communications, are expected to be more
severely affected by the continuing slow-down in the second quarter.

Additional savings measures implemented under the IFX10+ program are
expected to result in substantial additional cost and cash savings over and
above the savings levels realized in the prior quarter. As a consequence of
continued sales declines and an aggressive reduction in factory loading in
order to reduce inventory, Infineon expects combined Segment Result margin
in the second quarter to be within the range of a negative mid-to-high
teens percentage. Without the additional measures described above, the
impact of lower sales and factory loading on the bottom-line would have
been significantly more severe.

Following Qimonda’s insolvency filing, Infineon expects to deconsolidate
Qimonda in the second quarter. In this context, the company anticipates
that it will recognize accumulated losses related to unrecognized currency
translation effects related to Qimonda. As of December 31, 2008, the amount
of such accumulated losses totalled approximately Euro 100 million. The
recognition of such accumulated losses will not have any impact on
Infineon’s shareholders’ equity.

'Despite extremely challenging market conditions, our first quarter results
held up reasonably well, largely due to very good progress with our IFX10+
program. We successfully focused on liquidity management, contained cash
outflows and lowered our debt', said Peter Bauer, CEO of Infineon
Technologies AG. 'In the second quarter, market conditions will
unfortunately worsen further. Responding to this challenge, we are reducing
our cost and CapEx levels further. We will continue to focus on cash flows
by reducing inventory levels and fab loading even further and by managing
working capital tightly.'

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 February 6, 2009, at 10:00 a.m.
Central European Time (CET), 4:00 a.m. Eastern Standard Time (U.S. EST), to
discuss operating performance during the first quarter of the 2009 fiscal
year. In addition, the Infineon Management Board will host a press
telephone conference with the media at 11:30 a.m. (CET), 5:30 a.m. (U.S.
EST). 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.

Major business highlights of the first quarter of the 2009 fiscal year can
be found in the quarterly information at http://www.infineon.com.

IFX FINANCIAL AND TRADE FAIR CALENDAR (*preliminary date)
- Feb 12, 2009 2009 Annual General Meeting of Shareholders
- Feb 17, 2009 Analyst Presentation at the Mobile World Congress in
Barcelona
- Apr 30, 2009* Earnings Release for the Second Quarter of the 2009 Fiscal
Year
- Jul 29, 2009* Earnings Release for the Third Quarter of the 2009 Fiscal
Year
- Nov 19, 2009* Earnings Release for the Fourth Quarter and Full 2009
Fiscal Year

New in the IFX podcast section at www.infineon.com/podcast
- IP multimedia subsystem (IMS)
- One chip – 100 million mobile phones

D I S C L A I M E R
This press release includes forward-looking statements about the future of
Infineon’s business and the industry in which we operate. These include
statements relating to general economic conditions, future developments in
the world semiconductor market (including the market for memory products),
our ability to manage our costs and to achieve our savings and growth
targets, the resolution of Qimonda’s insolvency proceedings and the
liabilities we may face as a result of Qimonda’s insolvency, the benefits
of research and development alliances and activities, our planned levels of
future investment, the introduction of new technology at our facilities,
the continuing transitioning of our production processes to smaller
structure sizes, and our continuing ability to offer commercially viable
products.

These forward-looking statements are subject to a number of uncertainties,
including broader economic developments, trends in demand and prices for
semiconductors generally and for our products in particular, the success of
our development efforts, both alone and with partners, the success of our
efforts to introduce new production processes at our facilities, the
actions of competitors, the availability of funds, the outcome of antitrust
investigations and litigation matters, and actions by Qimonda and its
creditors and other interested parties, as well as the other factors
mentioned in this press release 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 29th, 2008.

As a result, Infineon’s actual results could differ materially from those
contained in these forward-looking statements. You are cautioned not to
place undue reliance on these forward-looking statements. Infineon does not
undertake any obligation to publicly update or revise any 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

06.02.2009 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

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