Infineon Technologies AG, one of Europe's three largest semiconductor companies, said it sees a difficult second quarter of fiscal 2001 ahead and that it expects 2001 sales to lag the prior year as a result of pricing pressures and high inventory at PC manufacturers.
The Munich-based DRAM and communications-IC supplier witnessed a sharp decline in its gross margin during the fiscal 2001 first quarter ended Dec. 31, although its revenue grew 8%, while net income jumped 111% to $260 million from $123.7 million, in the year-ago quarter.
Infineon, one of the top players in the memory markets, said it received a boost during the quarter from its communications business, which helped to push its revenue up to $1.54 billion from $1.43 billion in the first quarter of its fiscal 2000. Pricing pressures in the DRAM segment dragged the company's gross margin down to 40% in the quarter, compared with 53% in the immediately preceding quarter, and up from 37% in the December 1999 quarter.
"The market environment for memory products, especially in the PC market, will remain difficult during the [fiscal 2001] second quarter," Infineon said, in a statement. "Thereafter, Infineon expects the high inventory levels at PC manufacturers to come down and thus allow for a more stable price development for memory products."
Ulrich Schumacher, Infineon's president and chief executive, said in the press statement that the company will continue to move its business towards higher margin products in the wireline communications and smart card markets.
Sales into the wireline communications market rose 53%, to $196.2 million from $128.3 million while wireless communications sales climbed 17%, to $333 million, from $283.7 million. The two sections accounted for 34% of Infineon's sales during the quarter, up from 29% in the year-ago comparable quarter.
'We have successfully shifted our product mix towards higher margins, especially in our wireline communications and smart card businesses," Schumacher said. "We have also strengthened our customer partnerships in our key segments and significantly improved the utilization of our global distribution channels."