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Infineon to post loss
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June 20, 2001: 12:30 p.m. ET
German chipmaker expects loss of $510 million in third quarter
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LONDON (CNN) - German chipmaker Infineon Technologies issued a profit warning on Wednesday, saying it would make a loss of $510 million.
The German chipmaker, 71 percent owned by communications titan Siemens, said it expects revenue to decline by 30 percent in the third quarter, compared with the previous quarter.
 Europe's second-largest chipmaker predicted a loss before interest and income taxes of up to  600 million in the three months to June 30 due to a decline in demand for computer and mobile phone chips.
"There are at present no clear signs of a recovery in mobile phone demand," the company said. "During the current quarter, Infineon has experienced order delays and cancellations from some of its main customers, resulting in lower revenues and rising inventories."
The warning comes after two similar disclosures from rivals ST Microelectronics, the No. 1 European chipmaker, and No. 3 Philips Electronics. Both blamed a glut of chips and an economic slowdown.
"This is not a surpise after ST and Philips issued warnings but the extent of the losses are," Navdeep Sheera, an analyst at Schroder Salomon Smith Barney, told CNN.
Infineon shares plunged 11.6 percent to 30.88 in early Frankfurt trade.
The German company's rivals tracked its losses, ST fell 4 percent and Philips lost 3 percent. Siemens {FSE:FSIE] dipped 4.1 percent. ARM Holdings (ARM), Europe's biggest chip designer, fell 8.9 percent in London.
"All eyes are on the chip sector for any signs of recovery but there is no positive news coming through," Peter Oppenheimer, market strategist at HSBC, told CNN.
"You have to bear in mind that the chip sector was the first industry into a recession and its not unreasonable to believe it would be first to come out. When it comes out of a recession it should herald a recovery for the technology sector but chip inventories are critical."
Infineon's chief executive Ulrich Schumacher said the company could not rule out making a loss for its 2000/2001 business year. "We don't think that the next quarter will generate profits and this would lead to a full-year loss as well," Schumacher said.
Infineon, which makes chips used in mobile phones and computers, like its rivals has been caught out as wireless handset makers and computer makers cut back production as a U.S. economic slowdown spreads across the globe and into Europe.
Nokia, the biggest mobile phone maker, warned last week it would not meet profit expectations and said it now believes that the global wireless phone market will show "very modest growth" from 2000 levels, when 405 million handsets were sold.
 Overall, Infineon backed analysts' expectations and now expects global sales for semiconductor industry to contract by 20 percent.
Munich, Germany based Infineon (FIFX) said it would cut its capital expenditure by 1 billion in fiscal 2002. In the current year, it has slashed capital expenditure to about 2.3 billion from a planned programme of 2.8 billion.
The company added it had implemented a hiring freeze and would not replace staff lost through attrition.
Philips, Europe's biggest consumer electronics company, warned last week it expects its chip business will post a second-quarter operating loss of about $151 million and said revenue would fall by between 20 and 25 percent from the first-quarter.
ST Microelectronics (PSTM) forecast second-quarter sales would fall to between $1.55 billion and $1.60 billion, down 16 percent on the same period a year ago. 
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