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To: Don Green who wrote (67553)	3/13/2001 2:55:51 PM
From: Don Green	Respond to of 93625

O.T.?? Siemens cites Infineon woes in cutting forecast By Reuters Mar 13, 2001 (11:43 AM) URL: /story/OEG20010313S0098 German electronics and engineering group Siemens AG on Tuesdaybecame the latest European blue chip technology giant to sendshivers through the market with a cut in its earnings outlook. Shares in the company slumped by up to five percent after it acknowledged it would not meet earlier targets because of semiconductor unit Infineon, set to suffer due to the global drop in demand for memory chips. In December the Munich-based group forecast double-digit growth in orders and sales and even faster growth in earnings for its current year ending September 30. But in a statement issued a day after listing its shares on the New York Stock Exchange, Siemens said the target would only be reached if Infineon was not included in the results. ``As is well known, prospects in the semiconductor industry have changed significantly in recent months, as can be seen in the most recent market estimates by analysts,'' the company said in a statement. Siemens Chief Financial Officer Heinz Joachim Neubuerger said the recent spate of bad news from mobile handset makers would affect the communications segment, where Infineon has been looking to expand. ``If business at Ericsson, Nokia and Alcatel is having difficulties, it's clear that this will have effect on the component suppliers,'' he told reporters. But Siemens statement appeared to have raised eyebrows at Infineon, whose Chief Executive Officer Ulrich Schumacher told Reuters in an interview the company was not going to cut its outlook. ``It's not coming from us,'' he said, referring to the parent company's announcement. ``I was surprised when I read it.'' Spot prices for DRAM dynamic random access memory chips used in personal computers have fallen from over $9 last summer to slightly over $2. But Schumacher said he saw a clear pick-up in demand in two to three months even as he admitted that the company could make a second quarter loss. The Siemens statement came after virtually every major semiconductor maker in the U.S. warned investors they would be hit by a severe and rapid slowdown in the chip industry and weakening U.S. economic growth. European chip makers have been more upbeat but analysts have increasingly scaled back their forecasts for the year as pressure has grown in areas such as fixed line communications, which were previously considered safe. Analysts said Siemens' message was not as bad as recent warnings from some U.S. blue chips, saying a poor outlook for memory chips had been priced in. ``It's positive that they have stuck to their forecasts in their core areas, but it's obviously less good that they have taken Infineon out of it,'' WestLB Panmure analyst Klaus Repges said. ``But it's hardly a surprise given the fall in DRAM prices we have seen.'' Siemens' share price recouped some losses to be 1.96 percent down at 117.65 euros. Infineon shares shrugged off parent troubles, as traders said bad news for the sector had already been priced in. Schumacher's upbeat remarks helped the share extend gains to trade four percent up at 38.20 euros and propped Siemens' stock as well. The apparent discrepancy between Infineon and its parent seemed to stem from caution on the part of Siemens Chief Executive Heinrich von Pierer not to be caught later in the cycle with more bad news from the chip industry, analysts said. Von Pierer told reporters there were ``some uncertainties'' about earnings developments at Infineon just as he said there were positive developments in power generation, automation and medical technology -- other key business areas. In Siemens' last business year, Infineon accounted for earnings before interest and tax (EBIT) of 1.67 billion euros ($1.56 billion), about one third of the group total of 5.17 billion euros. Siemens, whose operations range from mobile phones to medical equipment and power stations, reiterated that it faced a mixed market environment, with weak demand for mobile telephones but booming demand in energy production. Von Pierer also confirmed a darkening outlook for the mobile handset sector after Swedish rival Ericsson issued a profit warning on Monday. He said global handset sales could be less than 450 million units this year, below earlier expectations. But Von Pierer said Ericsson's warning had been a surprise. ''Its extent was surprising as well,'' he said. Industry leader Nokia has not cut its first-quarter forecasts, but Deutsche Bank said in a note on Tuesday it was under growing pressure to do so soon if it needed to.