Infineon Staggers on Cell Phone Slump

Updated from 2:39 p.m. EST

SAN FRANCISCO -- Infineon TechnologiesIFX sank to a new 52-week low Thursday, after the German chipmaker posted a steep loss in its fiscal first quarter.

Infineon once again saw its financial results dragged down by its majority stake in memory chipmaker QimondaQI.

And Infineon warned that results in the current quarter will be under pressure due to lower-than-expected demand by some of its cell phone customers.

Shares of Infineon were down 11.2%, or $1.07, at $8.45 in midday trading Thursday.

In the three months ended Dec. 31, Infineon had revenue of 1.6 billion euros ($1.4 billion), down 24.8% year over year.

The company posted a loss of euro 396 million euros, or euro 0.53 euro a share, vs. net income of 120 million euros, or 0.15 euro a share, at this time a year ago.

Infineon said its earnings before interest and taxes were 65 million euros in the quarter, excluding the results of Qimonda, the DRAM business that Infineon spun off two years ago but still maintains a majority stake in.

Revenue in Infineon's communications group jumped 51% year over year to 356 million euros, thanks to Infineon's $450 million acquisition of LSI'sLSI cell phone chip business and the purchase of Texas Instruments'TXN DSL business.

But Infineon forecast that sales in its communications group will fall off by a mid-teens percentage level in the current quarter, due to lower-than-expected volumes in certain mobile platform phone projects as well as seasonality.

Infineon's outlook of stalling cell-phone demand echoes recent comments by RF Micro DevicesRFMD and National SemiconductorNSM. Both of those companies served up weaker-than-expected financial forecasts in recent weeks, blaming slowing business conditions among handset makers in China.

In a report Thursday, industry research firm iSuppli said sales of cell phone handsets made by Chinese companies will see a sharp slowdown in 2008.

According to iSuppli, Chinese handset makers enjoyed a huge spike in sales in 2007, with shipments up 76.2% year over year. But weakening consumer confidence among the Chinese customers served by those handset makers, as well as the lack of novel features for low-priced phones, will cause that growth rate to cool considerably in 2008, with iSuppli forecasting shipments to increase 19.7% this year.

Infineon didn't specify which customer or region was behind its slowdown, and noted that it expects its communications division to return to growth in its fiscal third quarter.

The company projected that revenue in the current quarter, excluding Qimonda, will decline by mid-single digit percentage levels sequentially, while the company's Qimonda-free earnings before interest and taxes will also decline, but remain positive.

"We continue to target 10% EBIT margin for the 2009 fiscal year, although uncertain prospects for the global economy, the adverse currency development, and the revised outlook are headwinds that make reaching this goal more challenging," said CEO Wolfgang Ziebart in a statement.