Infineon Cuts Jobs, Sees Lower Sales

The chipmaker will take a revenue hit from the loss of cell-phone customers and lay off employees.
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German chipmaker

Infineon Technologies

(IFX)

revealed a wrench in its makeover Wednesday, saying that it will lay off 400 workers and forfeit a huge chunk of planned revenue because one of its key customers went belly-up.

The customer, cell-phone maker

BenQ

, said in September that it was liquidating its operations.

According to Infineon, BenQ's eroding share of the cell-phone market had resulted in a significant decline in Infineon's communications business sales in recent quarters.

With BenQ now completely out of the picture, Infineon said it will take a charge of 80 million euros, or roughly $100 million, in fiscal 2006.

And Infineon said it has consequently decided to "focus" its mobile-communications activities on business with recently acquired and future customers, affecting about 400 jobs worldwide and resulting in restructuring charges of 30 million euros.

Shares of Infineon were off 1%, or 13 cents, at $12.04 in late trading Wednesday.

Infineon shed its memory division, now called

Qimonda

(QI)

, earlier this year in order to concentrate on making chips for the automotive, industrial and communications markets.

Infineon CEO Wolfgang Ziebart said the company remained committed to its plan of expanding its base of mobile communications customers.

"We have already achieved remarkable successes and will pursue the same course despite the loss of BenQ," said Ziebart. "Right now we have the potential of winning new designs on a series of projects with new, big-name customers. I am confident that we will get these projects signed and sealed."

Infineon said it recently added

Samsung

and

LG

to its list of customers.

Infineon said it will lose 150 million euros in planned sales in fiscal 2007, with 40 million to 50 million euros of the impact occurring in the first quarter of the year.

The company now expects its wireless business to break even in the 2007 calendar year.