Infineon cuts worker's hours despite profitable 4^th Quarter

Despite a profitable fourth fiscal quarter and fiscal 2012, German chip maker Infineon Technologies plans to cut hours for some of its employees and delay or cancel some projects. The company hopes that these actions will allow them to cope with the ongoing economic storm in Europe.

Infineon made a net income of about $175 million (138 million euros) on sales revenue of about $1.25 billion (982 million euros ) in the fourth fiscal quarter ended Sept. 30, 2012. For the full year Infineon made a net income of about $544 million (427 million euro) on annual revenue of about $4.97 billion (3,904 million euro). However, sales on a quarterly basis were down sequentially by 1 per cent and by 5 per cent compared with the same quarter a year before.

The cuts and other measures were revealed by incoming CEO Reinhard Ploss as he discussed the financial results. Ploss took over from retiring CEO Peter Bauer at the end of the financial year.

In a statement Ploss said: "It was already clear this summer that the economic headwind is increasing and times are getting harder. Despite its strength, Infineon cannot escape this situation. Signs of further declines in revenues and especially, in our margin, are becoming clear."

In response Infineon is introducing four measures to try and save more than 100 million euros (about $125 million) of cost in the company's 2013 fiscal year. This should reduce the budgeted investment for FY13 from 500 million euro to 400 million. This compares with the investment budget of 890 million euro in FY2012.

Under an initiative called "cold steel" Infineon will cut production costs by temporarily switching off underutilised equipment, as well as reducing the temporary workforce and the selective use of short-time work.

In R&D and sales and marketing Infineon plans to postpone or cancel projects of lesser strategic importance and reduce payments to external service providers.

The company is freezing headcount and postponing salary increases by six months and it is reducing its budget for consulting and travel costs to a minimum.

Tough winter ahead
"Altogether, this is saving over 100 million euros. By putting these measures into place, Infineon is taking the appropriate reaction of a healthy company to a weak market environment," said Ploss in the statement.

Ploss said that Infineon had already begun implementing short-time working at its facility in Warstein with effect from September in response to declining demand for industrial applications. Ploss did not detail how extensive the short-time working would be across Infineon, or how deep it would likely cut into workers' hours, or whether they would continue to take home their basic contracted remuneration.

Infineon is forecasting that the fourth calendar quarter, the first quarter of its 2013 fiscal year, will see sales reduce by low teens of percentage sequentially. It expects all of its business units to report lower revenue.

For all of fiscal 2013 Infineon is forecasting reduction in revenue compare to the previous fiscal year by a mid-to high-single digit percentage rate based on the assumption of a tough first half of the year and an improved second half.

- Peter Clarke
??EE Times