Feb. 7 (Bloomberg) -- Infineon Technologies AG, Europe's second-biggest semiconductor maker, fell the most in more than six years in German trading after reporting a fourth straight quarterly loss and cutting earnings and sales forecasts.

Infineon sank 14 percent, the biggest drop since June 2001. The loss in the first quarter ended Dec. 31 was 396 million euros ($579.3 million), or 53 cents a share, compared with a 120 million-euro profit, or 15 cents, a year earlier, the Neubiberg, Germany-based company said today.

An 85 percent slide in memory-chip prices last year caused by a supply glut led to a first-quarter loss of 598 million euros at memory unit Qimonda AG. Infineon said the communications unit, which makes chips for Nokia Oyj mobile phones, will be unprofitable this year because of lower demand from handset makers.

``The big disappointment is the outlook,'' said Matthias Maus, an analyst at BHF-Bank based in Frankfurt. ``People were hoping that a turnaround of the communication division would be imminent.''

Personal-computer makers may not increase spending on memory chips because they still have too many unused parts, Bear Stearns & Co.'s Gurinder Kalra said yesterday.

Infineon said sales will rise by less than 10 percent this year excluding Qimonda, versus a December forecast of as much as 10 percent.

Stock Slump

Infineon closed down 91 cents at 5.79 euros in Frankfurt, having earlier fallen as much as 19 percent, the biggest slide since the stock was sold for 35 euros in an initial public offering in March 2000.

Previously, the company had forecast a profit before interest, taxes and one-time items for this year at the communication unit.

This quarter, the unit will post a loss of about 30 million euros because of seasonal swings and lower-than-anticipated sales from certain mobile-phone projects, Infineon said today. Spokesman Thomas Weber declined to give more details.

There's weakness ``across the board,'' Hermann Eul, the executive board member responsible for the communication division, said on a conference call today. Full-year sales at the division are anticipated to advance between 25 percent and 30 percent, the company said.

Infineon's competitors in making mobile-phone chips include STMicroelectronics NV, Europe's biggest maker of semiconductors, and Texas Instruments Inc., the world's largest maker of wireless-handset chips.

For the automotive and industrial division, whose clients include Siemens AG, Infineon confirmed the December forecast for sales and earnings to be ``slightly'' down from a year earlier.

Sales Sink

Infineon's total sales sank 25 percent to 1.6 billion euros in the first quarter. The loss in the quarter was smaller than the 418.5 million-euro median estimate of 10 analysts in a Bloomberg survey.

The revision of the 2008 sales outlook for Infineon excluding Qimonda was also prompted by the dollar's drop, spokesman Guenter Gaugler said by telephone.

Excluding Qimonda, Infineon continues to aim for a 10 percent margin on earnings before interest and tax next year, Infineon Chief Executive Officer Wolfgang Ziebart said. ``Uncertain prospects for the global economy, the adverse currency development, and the revised outlook are headwinds that make reaching this goal more challenging,'' he said.

Infineon's margin on earnings before interest, taxes and one-time items will be a ``low to mid single-digit'' percentage of sales this year, also excluding Qimonda.

In January, Qimonda reduced its target for capital spending by 250 million euros for this year after delaying construction of a production site in Singapore until market conditions improve.

Qimonda IPO

Infineon completed an initial public offering of Qimonda in August 2006 to shift its focus to tailor-made chips for automotive, industrial and mobile-phone applications. Infineon plans to cut its stake in Qimonda to ``significantly'' less than 50 percent and may also distribute Qimonda stock as a dividend after its 2009 annual meeting.

Ziebart said on a conference call today that the company has no intention to fund Qimonda, and the plan to sell shares hasn't changed. Qimonda said yesterday it plans to sell bonds convertible into shares to ``maximize its cash position.''

Chief Financial Officer Peter Fischl said there's a risk of a potential writedown to account for the difference between Qimonda's share price and the value on Infineon's books. Infineon said last week it valued Qimonda, which closed at $5.17 in New York yesterday, at about $12 a share as of Dec. 31.

The valuation issue may also weigh on the shares, although it isn't new, said Juergen Wagner, an analyst at Sal. Oppenheim in Frankfurt with a ``neutral'' rating on Infineon.

Infineon has said it plans to use proceeds from selling Qimonda shares to make acquisitions or buy back stock, and that it doesn't depend on the sales to fund purchases.

To contact the reporter on this story: Philipp Grontzki in Frankfurt at pgrontzki@bloomberg.net

Last Updated: February 7, 2008 12:38 EST