Infineon Expects Quarterly Loss

Selling prices for DDR2 memory chips have slumped.

Author:: TSC Staff
Publish date:: Jan 20, 2006 1:11 PM EST

Updated from 12:00 p.m. EST

German chipmaker

Infineon Technologies

(IFX)

expects to post a first-quarter loss as selling prices slumped for DDR2 memory chips.

The company said Friday it expected to lose 183 million euros (about $217 million), or 0.25 euro a share.

Revenue was 1.67 billion euros (about $2.02 billion).

Following the announcement, shares of Infineon were recently off nearly 5% to $9.24, contributing to an already glum day among semiconductor names. The

Philadelphia Semiconductor Index

, fresh off a 52-week high, was recently down 3.7% as cautious guidance the night before from

Xilinx

(XLNX) - Get Report

and a sluggish book-to-bill report hurt chip-equipment names like

Applied Materials

(AMAT) - Get Report

Infineon said two of its logic segments -- the Automotive, Industrial and Multimarket unit and its Communication division -- performed ahead of internal and analysts' expectations.

However, that favorable development couldn't offset "significant deterioration" of the cash flow in memory products, due mostly to a strong fall in average selling prices, in particular for DDR2 memories.

The memory-chip business is extremely volatile and recent price swings have also affected

Micron

(MU) - Get Report

, whose fiscal

first-quarter profit was cut by more than 60% as a result of what the company said was a 15% decline in the price of PC DRAM.

Infineon

announced plans in November to get out of the memory business, which accounted for about 41% of the company's overall revenue in the company's fourth quarter. Infineon intends to divest itself of the business in July, with a subsequent IPO of the memory business as the ideal option. The spinoff will allow Infineon to focus on its higher-margin logic business, selling analog, mixed-signal and radio frequency chips to automotive and industrial markets.