May 29 (Bloomberg) -- Infineon Technologies AG, whose chief executive officer quit this week, declined the most in more than three months in Frankfurt trading after cutting profit and sales forecasts for the unit that makes communications chips.

Infineon fell 10 percent. Revenue from the communications unit in the third quarter ending June 30 will be unchanged and the loss before interest, taxes and one-time items will be wider than forecast earlier, Neubiberg, Germany-based Infineon said.

A delayed project with Nokia Oyj, the world's biggest mobile-phone maker, fewer orders and higher expenses hurt earnings, Infineon said. Infineon, which generates about 29 percent of sales from the communication unit, has lost money for the past three years. Chief Executive Officer Wolfgang Ziebart resigned three days ago after a disagreement with the board.

``This has been a week of quite negative newsflow, and I'm sure investors will be unhappy,'' said Sandeep Deshpande, an analyst at JPMorgan Chase & Co. in London, who rates Infineon ``overweight.'' ``They should have published today's announcement with the Ziebart departure.''

Infineon declined 63 cents to 5.63 euros, the biggest drop since Feb. 7, in Frankfurt. The stock is down 30 percent this year.

Nokia Delay

The loss before charges and gains at the communications unit will be about 40 million euros ($62.3 million) in the third quarter, compared with an earlier loss forecast of 25 million euros, Infineon spokesman Guenter Gaugler said.

Order volumes from an unspecified project for high-speed wireless access chips were lower than anticipated, Gaugler said. A project with Nokia was also delayed, he said. Before Feb. 7, Infineon was predicting a profit for the division.

``We have multiple suppliers for single chip solutions and therefore we don't expect the Infineon announcement to have any impact on Nokia,'' Brett Young, spokesman at Nokia, said in an e- mailed response to questions. ``Our single chip solutions plans are progressing according to plan.''

Earnings at the unit will also be hurt by costs to customize chips for customers, Infineon said. Infineon said sales and Ebit excluding gains and charges will improve in the fourth quarter from the previous quarter.

Part of the revenue shortfall probably stems from a slower- than-expected ramp up of the platform for Apple Inc.'s new iPhone with so-called third-generation capabilities, Credit Suisse analysts Adrien Bommelaer and Gaurav Mehta said in a note to investors. The analysts rate Infineon ``neutral.''

Industry Pressure

Texas Instruments Inc., the second-largest maker of mobile- phone chips after Qualcomm Inc., said May 8 that its wireless business shrank 3 percent last year.

STMicroelectronics NV, Europe's biggest semiconductor maker, has said it sees opportunities to expand in areas including digital baseband processors for third-generation wireless phones.

Last month, Geneva-based STMicroelectronics agreed with NXP BV to pay $1.55 billion for 80 percent in a wireless-chip venture, a move designed to reduce costs and pool resources.

Western European mobile-phone sales dropped last quarter for the first time since at least 2001 as higher costs of living crimped consumer spending, researcher Gartner Inc. said yesterday. Total unit sales slipped 16 percent to 35.9 million from a year earlier. The global market rose 14 percent.

CEO Departure

Ziebart, 58, will step down on June 1 because of ``different opinions on the future strategic orientation'' of the company, Infineon said May 26. Peter Bauer, a member of the executive board, will take over Ziebart's role as spokesman for the management board.

Infineon, which reported its biggest quarterly loss since its initial public offering in 2000 on April 23, said that day that communications revenue should grow by a ``mid- to high- single digit'' percentage in the third quarter from the second because of scheduled increases in production for mobile-phone customers.

The unit may show an operating profit next year, also excluding one-time items, Infineon said at the time.

Infineon had to look for new customers for the division after Benq Mobile, the biggest client at the time, ran out of cash in 2006. Infineon has expanded the unit through acquisitions, including the purchase of the mobile-phone and satellite-radio chip business of LSI Corp.

The company, which has the top five mobile-phone makers as customers, is scheduled to hold a conference for analysts and investors on June 3.

``I don't think they can make sustainable profits in the communication segment and I guess they will sell it or look for a partner at some point,'' Juergen Wagner, an analyst at Sal. Oppenheim in Frankfurt, said yesterday. Wagner cut his recommendation on Infineon to ``reduce'' from ``neutral'' today.

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

Last Updated: May 29, 2008 12:40 EDT