Infineon creates war chest for anti-trust cases

Despite receiving a financial boost from higher market prices for memory products, Infineon Technologies AG Tuesday posted a large third-quarter loss due to charges resulting from ongoing U.S. and European dynamic RAM anti-trust investigations as well as related potential civil claims.

Infineon, in Munich, raised its accrued charge in relation to ongoing legal cases to €212 million ($263.7 million), an increase of €184 million, the company said in a statement.

Net income in Infineon’s fiscal third quarter before accrual rose to €107 million ($129.3 million as of June 30, the last day of the period being reported). But as a result of the accrual costs, the company posted a net loss in the quarter of €56 million, compared to net loss of €116 million in the same quarter last year, Infineon said.

Basic and diluted earnings per share came in at a loss of €0.08 in the third quarter, which was an improvement on a year-on-year basis when Infineon reported a loss of €0.16. per share, but a marked decline when compared to its second quarter earnings of €0.05 per share.

Infineon reported third-quarter revenue of €1.9 billion, up 30% year-on-year and 14% sequentially. Revenue coming from outside Europe made up 60% of total revenue for the company, with sales in North America constituting 22% of total revenue, which was comparable to the previous quarter. Sales in the Asian market represented 37% of total revenue, up sequentially from 35%.

Third-quarter revenue in its memory products division was €811 million, an increase of 43% over the same quarter last year and an sequential increase of 22%, Infineon said. The gains came primarily from an overall market rise in DRAM prices, the company said.

Along with the ongoing anti-trust cases in the U.S. and European Union, Infineon is dealing with a total of 25 class action lawsuits, which have been filed against the chip maker and other DRAM suppliers in various federal and state courts in the U.S., said Max Dietrich Kley, the company’s CEO, in a news conference that was also made available over the Web.

The lawsuits have come primarily from OEMs and retailers, Kley said, but indicated that Infineon may be beginning to see a light at the end of the litigation tunnel.

“Over the last few months, we’ve tried to come to an agreement with the U.S. Department of Justice, which I can’t discuss now, but we have an idea of the approximate amount of damages that might result,” Kley said. “The [Justice Department] has different principles when they determine a fine and we have received some indication as to those principles that may apply, but we can’t give those figures right now.”

For Infineon’s fourth quarter, Kley said that the company expects continued overall growth in revenue and earnings. Specifically, in its memory products division, Infineon forecast increases due to seasonal demand and modest supply additions in the industry, resulting in what it called a favorable supply-demand-balance for the quarter.

By the end of the third quarter, Infineon said it had approximately 34,400 employees worldwide, including about 6,900 engaged in research and development.