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Qimonda restructures, sells shares to Micron

Posted: 15 Oct 2008     Print Version  Bookmark and Share

Keywords:global restructuring  cost reduction  DRAM industry 

Qimonda AG has announced a global restructuring and cost reduction programme. The programme is intended to reposition the company in the market and substantially increase its efficiencies through a wide-ranging realignment of its business.

Qimonda also announced that it has also agreed to sell its 35.6 per cent stake in Inotera Memories Inc., its joint venture with Nanya Technology Corp., to Micron Technology, Inc.

Under the terms of the agreement, Micron has agreed to purchase Qimonda's shares in Inotera for Rs.1,720.42 crore (US$ 400 million) in cash in two instalments. Qimonda will receive Rs.860.21 crore (US$ 200 million) for about one-half its holding in about one week, by which time Qimonda expects receipt of the governmental approvals and satisfaction of the other customary closing conditions necessary for this step, and the remaining Rs.860.21 crore (US$ 200 million) for the second half once the remainder of the conditions to the final closing of the transaction have been satisfied. According to the agreement, Qimonda's share of Inotera's capacity will be ramped down over the eight months following the closing. Qimonda expects to record a one time book loss on its investment in Inotera of approximately Rs.1,000 crore (Euro 300 million) as a result of the transaction. Citigroup Global Markets Limited acted as exclusive financial advisor to Qimonda in connection with the transaction.

"Qimonda has been engaged in an ongoing review of its business over the last several months. The severity of the current downturn in the DRAM industry and its consequences for our financial situation has led us to redefine our operating model. As such, Qimonda is executing a strategic plan to transform the company, becoming leaner and more focused," said Kin Wah Loh, Chief Executive Officer of Qimonda AG. "The sale of our stake in Inotera is a key step in Qimonda's restructuring, helping to give us a cash influx and sharpening our focus. Going forward, we plan to concentrate our efforts on selected market segments where we can best leverage our innovative technologies. We will rationalise our manufacturing footprint and streamline our operational and personnel structures. We expect these measures to improve our competitive position and to provide additional strategic opportunities for our company."

Qimonda intends to focus on its core competencies in technology and product development by concentrating on infrastructure and graphics products on the basis of its new buried wordline technology in 300mm manufacturing facilities.

Consequently the following major structural measures will be implemented:

• Qimonda plans to ramp down manufacturing at its 200mm facility in Richmond, USA by January 2009. This will complete Qimonda's exit from 200mm production.

• The backend component and module manufacturing in Dresden, Germany is planned to be shut down by end of March 2009.

In addition to these structural measures, the company will reduce its R&D and administrative expenses and its headcount, mainly in Munich, Dresden and Raleigh, to reflect the focused product portfolio and reduced production capacities.

These moves will affect approximately 3,000 employees globally. Qimonda expects the restructuring programme to result in approximately Rs.2,000 crore (Euro 450 million) of annualised cost savings once it has been fully implemented. Management expects to have implemented the changes by the end of the third quarter of its financial year 2009. Qimonda expects to incur restructuring charges of about Euro 50 million in the next financial quarter in connection with the programme, with the potential for additional charges in the two subsequent quarters that will be determined following negotiations with the works councils.

With the sale of the Inotera stake and the restructuring programme, Qimonda has taken the first critical steps towards the new strategic direction that is necessary in these most challenging industry conditions. It continues to seek financial or strategic partnerships that can assist it in completing the process it has set in motion through the transaction and restructuring initiatives announced today. Qimonda may or may not be successful in these efforts. This process may also be supported by the ongoing efforts of Infineon Technologies AG, if successful, to dispose of its stake in Qimonda. Infineon, which currently owns approximately 77.5 per cent of Qimonda's shares, issued a related announcement earlier today.

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