Infineon, Europe's second-biggest semi-conductor maker, will probably not make an operating profit this fiscal year. The financial bad news comes on the heels of a corruption scandal.
Infineon has slipped far into the red
In a telephone news conference on Tuesday, Infineon head Wolfgang Ziebart said the "unsatisfactory results" were due to memory chip prices that have fallen 30 percent. Mobile phone manufacturers are also buying fewer components from the Munich-based company.
Wolfgang Ziebart, CEO of Infineon Technologies
"I don't think it will be possible to attain a positive operating result this year," Ziebart said. The company's fiscal year ends in September.
Infineon had posted a third-quarter loss earlier in the day owing to both the fall in memory chip prices and restructuring costs linked to the closure of a plant in Munich. The company said earnings before interest and tax showed a loss of 234 million euros ($282 million), compared with a profit of two million euros in the same period one year earlier.
Analysts had expected a loss of between 80-225 million euros. The group's net loss widened to 240 million euros from a loss of 56 million, much worse than forecasts that ranged from 75 to 187 million in losses.
Profit and loss estimates among chip makers are difficult to estimate because chip prices themselves can change quickly, depending on demand. All of the big players in the sector, AMD, Samsung and Infineon, are struggling because of fierce pricing wars. The German association ZVEI, which follows the sector, has recently cut its growth estimate for 2005 from three to one percent.
But the German semi-conductor maker said it expected memory chip prices to remain stable in the fourth quarter as worldwide demand increases were matched by only moderate supply growth.
Scandal not to blame
Ziebart said the on-going investigation into the corruption scandal did not have any effect on the chipmaker's performance.
Andreas von Zitzewitz
Ten days ago, Andreas von Zitzewitz (photo), manager of Infineon's core memory chip unit, resigned amid allegations that he received kickbacks of up to 259,000 euros ($312,000) for arranging racing sponsorship deals. Another executive, Harald Eggers, is also under investigation for allegedly accepting kickbacks of up to 50,000 euros ($60,000). Ziebert said he was "interested in a thorough investigation of the matter" and assured the prosecutor's office the company's full cooperation, but he added: "I would have liked for both my colleagues and myself to be spared this."