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Infineon Swings to Loss

Profit tanks in memory chips.
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reported a wider-than-expected fourth-quarter loss Friday that helped frame the rationale for its memory-chip spinoff.

The company lost about $117 million in the three months ended Sept. 30 compared with earnings of about $51 million a year ago. Sales fell 13% from a year ago to $2.03 billion. In the second quarter, Infineon lost about $280 million on sales of $1.88 billion.

In memory chips, fourth-quarter sales fell 5% from a year ago to about $898 million while earnings before interest and taxes fell 77% to $40 million. The company cited falling unit prices and a weakening dollar.

The German firm

announced Thursday its intention to spin off the memory division, which accounts for about 40% of total revenue. Infineon will concentrate on the logic business -- providing analog, mixed-signal and radio-frequency chips to the automotive and industrial electronics industries.

In its other major units, revenue fell 12% from a year ago and EBIT fell 70% in the automotive, industrial and multimarket division, as volume and pricing weakened in the security and chip-card businesses. In communications, sales fell 29% from a year ago but the loss before interest and taxes narrowed by 37%.

Looking ahead, Infineon expects the worldwide semiconductor market to grow in the mid-single-digits during calendar 2006, with its own business growing "at least in line with the market."

"In its automotive, industrial and multimarket segment, the company anticipates further growth due to increasing demand for electronics in cars, power conversion, and energy-saving technologies," Infineon said.

"In addition, Infineon expects further business opportunities in the communication segment, mainly due to its capability in radio-frequency technologies. In its memory product segment, Infineon will continue to focus its portfolio on higher margin growth businesses," the company said.

In its first quarter, Infineon said it expects revenue to "increase slightly" from the fourth quarter.