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April 21, 2004

Infineon back in black after bloodletting

After the recent round of corporate bloodletting at Infineon Technologies AG, Europe's second-largest chipmaker has reported its third consecutive quarterly profit thanks in part to strong sales in the automotive and industrial sectors.

By CBR Staff Writer

For the second quarter, it posted net income of 39m euros ($46m), compared with a net loss of 328m euros ($388m), on revenue of 1.67bn euros ($1.97bn), up from 1.484bn euros ($1.75bn). For the six-month period ending March 31, it posted net income of 73m euros ($86.4m) compared with a net loss of 368m euros ($435.6m), on sales of 3.29bn euros ($3.89bn), compared with 2.92bn euros ($3.46bn) in the same year-ago period.

In the second quarter, Infineon’s business continued to develop positively, said Max Dietrich Kley, acting CEO. Business performance not only improved because of the overall strong customer demand but also because of improved productivity.

The sequential growth was mainly achieved through a further increase in revenue from the Automotive & Industrial business group, and higher sales volume for Memory Products. The year-on-year increase also reflected significantly improved Secure Mobile Solutions revenue.

Sequential quarterly revenue improved despite continued price decline in some product segments, and the negative impact of the weakening US dollar exchange rate.

It has been a turbulent period for Infineon. The Munich, Germany-based company is currently seeking a new chief executive, following the unexpected departure of CEO Ulrich Schumacher, who last month resigned after clashing with other senior management.

According to the reports, Schumacher’s aggressive management techniques apparently ran counter to the consensus-based approach more common in Germany. His departure was followed a few days later by three other executives, all of whom were seen as close allies of Schumacher.

Infineon only returned to profitability in the July-September quarter last year, after nine straight quarters of losses, a period during which the chip-making industry was battered by falling demand for new computers.

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During the past three years it cut more than 5,000 jobs, and under Schumacher it had threatened to move its headquarters to Switzerland because of high German taxes and labor costs.

As part of Schumacher’s plans to reduce costs, Infineon outsourced various functions to service providers such as Electronic Data Systems. Outsourcing parts of the workforce was apparently a point of contention between Schumacher and other members of the supervisory board.

The supervisory board chairman, Max Dietrich Kley, is heading the company until a successor is found. A new chief executive could be named as early as July, and the chipmaker is thought to be considering two candidates, each with a background in the sector.

This article is based on material originally published by ComputerWire

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