Qimonda Reports Results for the Third Quarter of Financial Year 2008

Business Wire, July 24, 2008

* Net sales declined to Euro 384 million; EBIT loss narrowed to Euro 386 million and net loss narrowed to Euro 401 million from the previous quarter

* Gross cash position of Euro 630 million; net debt position of Euro 1 million

* Significant progress with comprehensive cost reduction program to lower break even point

* Introduction of 65nm Buried Wordline technology in September 2008 on track: Intel validation for 1G DDR2 components using new technology achieved

MUNICH, Germany -- Qimonda AG (NYSE: QI) today announced results for the third quarter of financial year (FY) 2008, which ended June 30, 2008. Net sales decreased to Euro 384 million, or 7 percent, from Euro 412 million in the second quarter of FY 2008. Compared to the third quarter of FY 2007, sales declined 48 percent from Euro 740 million.

In the third quarter of FY 2008, Qimonda recorded an EBIT loss of Euro 386 million compared to an EBIT loss of Euro 468 million in the second quarter of FY 2008 and an EBIT loss of Euro 323 million in the third quarter of FY 2007. Net loss was Euro 401 million, or a loss per share (basic and diluted) of Euro 1.17, compared to a net loss of Euro 482 million in the second quarter of FY 2008, or a loss per share (basic and diluted) of Euro 1.41. In the third quarter of FY 2007, Qimonda reported net loss of Euro 218 million or loss per share (basic and diluted) of Euro 0.64.

For the first nine months of FY 2008, Qimonda recorded net sales of Euro 1,309 million, a decrease of 55 percent compared to the same period last year. EBIT loss for the first nine months of the current financial year was Euro 1,444 million compared to a positive EBIT of Euro 12 million in the first nine months of the previous financial year. Net loss amounted to Euro 1,481 million or a loss per share of Euro 4.33 compared to net income of Euro 16 million or earnings per share of Euro 0.05 in the first nine month of FY 2007.

"We have reduced our loss in the third quarter and have made significant progress with our productivity improvement and cost reduction program, and we expect the impact to become noticeable in the current and next quarters," said Kin Wah Loh, President and Chief Executive Officer of Qimonda AG. "In the third quarter, we have completely phased out less productive external foundry capacities. In addition, we have converted almost 90 percent of our capacities to 80nm and 75nm at the end of the quarter. In particular we have been able to accelerate our conversion to 75nm. The introduction of our first 1G DDR2 based on 65nm buried wordline technology in September 2008 is on track, and we have already achieved Intel validation for this chip on the component level. We expect to complete our workforce reduction and our cost reduction program by end of September as planned, which we believe will enable us to lower our breakeven point by about Euro 45 million per quarter. With the progress we have made, we feel well positioned for further recovery in our margins in the coming quarters."

Results from Operations

In the third quarter, Qimonda realized bit shipment growth of 12 percent compared to the corresponding period one year earlier. Net sales declined mainly due to a significant 45 percent decline in average selling price for the company's products compared with the prior year quarter that was only in part offset by the modest increase in bit shipments. Compared to the second quarter of FY 2008, the Euro 28 million decline in net sales was primarily caused by a further weakening of the US Dollar compared to the Euro, as well as by a 2 percent decline in bit shipments and a 1 percent decline in average selling price in the third quarter. The share of bit shipments to non-PC applications increased to more than 50 percent in the third quarter.

In the third quarter of FY 2008, Qimonda generated 32 percent of its net sales in North America, 16 percent in Europe, 41 percent in Asia Pacific and 11 percent in Japan.

Year over year, gross and net loss for the third quarter were further negatively influenced by the significant decline in average selling prices. The effect of the rapid and deep price decline could not be offset by higher bit shipments - which increased more modestly than in past quarters as Qimonda cut less productive capacities - and improved manufacturing productivity. The phase out of external foundry capacities in the third quarter and the resulting volume decline had a negative effect on cost per unit; this offset manufacturing per-unit cost reductions in Qimonda's in-house facilities. However for the fourth quarter, Qimonda expects a significant reduction in manufacturing per-unit costs as a result of the accelerated conversion to 75nm process technology and improving yields. Compared to the second quarter, net loss narrowed primarily due to the absence in the third quarter of the second quarter's Euro 61 million write off of goodwill and a Euro 37 million positive effect from reduced inventory write-downs due to increasing price levels for standard DRAMs during the third quarter. EBIT loss and net loss in the third quarter include Euro 20 million in restructuring charges, mainly related to the cost reduction initiatives. For the fourth quarter, Qimonda expects to record about Euro 10 million in additional restructuring charges related to these cost reduction initiatives.