Qimonda files for insolvency amid global credit crunch
Putting heavy emphasis on its Buried Wordline technology, Qimonda files for insolvency as a way to accelerate its restructuring process and reposition itself back onto a solid base.
By Suzanne Deffree, Managing Editor, News -- EDN, January 23, 2009
Qimonda AG management today filed an application with the local court in Munich, Germany, to open insolvency proceedings, hoping to speed efforts to reorganize the company as part of its ongoing restructuring program.
“German insolvency law offers the opportunity to accelerate the restructuring process that has already been started in order to reposition the company back onto a solid base,” said Kin Wah Loh, Qimonda's president and CEO, said in a statement. "Qimonda possesses established products and, with its Buried Wordline technology, is currently bringing a promising future technology to the market."
To be true, insolvency is not an alternate term for bankruptcy. However, insolvency, the inability to pay debts as they come due, can lead to bankruptcy, a determination of insolvency made by a court of law with resulting legal orders to meet the insolvent debts, including possible business liquidation.
Qimonda said its insolvency petition is the result of the massive drop in DRAM prices and dramatically decreased access to financing on the capital markets. Indeed, on the global credit crunch, a $450 million financing package meant to bail Qimonda out of its economic hole and involving the Free State of Saxony, Qimonda's parent company Infineon, a Portuguese financial institution, and additional banks could not be completed.
Industry watchers began speculating on Qimonda's insolvency in Q3 2008 and suggested at the time that a competitor could acquire the company at a "fire sale" price.
“We assume we will be able to continue our business within the context of our restructuring program with the support of the temporary insolvency administrator and our employees,” Loh said. “ We are especially counting on the excellent relationships with our customers and suppliers, with whom we have made significant progress in developing our Buried Wordline technology during the last months.”
Today's filing comes after Qimonda in October 2008 announced a global restructuring and cost-reduction program, one that saw the memory maker cut 3000 jobs.
Qimonda also announced at the time that it would shut down its 200-mm fab in Richmond, Va, by the end of January 2009, eliminating all 200-mm fab operations, as well close its back-end component and module manufacturing in Dresden, Germany, by the end of March 2009. Qimonda today reported that those efforts are on track.
The company further sold its stake in Inotera Memories Inc in November 2008, reducing its exposure to the PC market and its associated cash outflow going forward, but doing so below its investment in the Nanya DRAM joint venture Qimonda sold its stake to Micron for $400 million in cash, forcing it to record a one time book loss on its investment in Inotera of approximately $408 million.
"We believe that post restructuring, Qimonda [QI] may become a niche player as the company may try to focus on specialty graphics and server segments, which we believe may prove challenging," Tim Luke, a semiconductor market analyst with Barclays Capital, in a research note this morning. "We also believe QI would move to exit commodity PC DRAM. With the sale of its Inotera stake and exit from commodity PC DRAM, we believe QI's share may decline to below 5% of the global DRAM market."
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I can't believe government officials at Saxony and Qimonda management still want to continue operations in Germany. For what? They are out of money. It's clear for these kinds of commodity products, Asians do the job for less cost. 12,000 layoffs are on the horizon.
J. Boone - 2009-28-1 13:15:00 PST
