Analyst: Best all around for Infineon to kill Qimonda
he's got a point though don't kill it - refocus it ... Qimonda could sell its Inotera stake and focus on specialty DRAM etc. it's going to be hard to compete in commodity DRAM and it's going to drag down Nanya who needs a stronger partner.)
Bolaji Ojo
EE Times
(03/20/2008 1:26 PM EDT)
MANHASSET, N.Y. -- A semiconductor industry analyst has called on Infineon Technologies AG to shutter Qimonda AG, its majority-owned and money-losing DRAM division, arguing that such a move has become necessary to help the company focus better on re-energizing its remaining business units, as well as help ameliorate the general DRAM oversupply situation.
Malcolm Penn, CEO at London-based research firm Future Horizons, said Infineon would have a difficult time finding a buyer for its remaining 77.5 percent stake in Qimonda due to oversupply and severe pricing problems in the market.
"There is absolutely no commercial, market, business, technology or competitive reason for anyone to buy Qimonda," said Penn in a written response to questions from EE Times. "Even if you paid someone to take Qimonda off your hands, the recipient would have to be mad or foolhardy to consider it."
Infineon has said it wants to "significantly" reduce its interest in Qimonda below 50 percent by the first quarter of 2009, although executives at the semiconductor company admitted that selling their stake has so far been difficult.
The company sold a portion of its Qimonda shares last September, but noted that this was done at a net loss of 84 million euros, according to figures from a February 14 presentation by president and CEO Wolfgang Ziebart during Infineon's annual general meeting.
Ziebart said problems at Qimonda had a "negative effect on the Infineon Group's earnings" during the fiscal year ended Sept. 30, 2007 and "weighed heavily on group revenues, which slipped to 7.68 billion euros last year from 7.93 billion euros in fiscal 2006."
Qimonda's and Infineon's stock prices have suffered over the last 12 months, mainly as a result of problems at the memory supplier, but also due to outstanding issues within Infineon's communications-IC business.
Qimonda's American Depositary Share (ADS) price fell in intraday trading on Wednesday (March 20) to $4.10, down 76 percent from the 52-week high of $17.29, giving the company a market value of about $1.4 billion.
This puts Infineon's stake at the memory maker at approximately $1 billion before charges. Qimonda had approximately $1.5 billion in cash and short-term investments and long-term debt of $324 million at the end of its last fiscal year.
Liquidating Qimonda could help Infineon put a quick end to the losses at the company, although it would also have to deal with issues related to laying off the memory maker's more than 13,000 employees. Also, Infineon might not be easily able to dispose of the company's assets.
Qimonda's gross profit tumbled more than two-thirds, to $311 million in the fiscal year ended Sept. 30, 2007, down from $973 million in the previous fiscal year, as DRAM prices nosedived at a double-digit clip per quarter. Analysts estimate Qimonda's fiscal 2008 revenue would slip to $4.8 billion, down from $5.2 billion in fiscal 2007. They expect the company to report a net loss of $5.57 per share for the ongoing year, wider than the 0.97 cents per share loss it recorded for fiscal 2007.
A recovery in DRAM pricing will not occur until the current oversupply situation is corrected, according to Future Horizons' Penn, who suggests one or more suppliers should exit the business.
"The industry as a whole would benefit enormously if Qimonda was simply to die," he said. "The current problem in DRAM is oversupply. Taking out a competitor will go a long way to helping that situation." |
