Qimonda Secures Infusion

As posted by: Wall Street Journal

FRANKFURT -- Qimonda AG of Germany will get a cash infusion of €325 million, or about $450 million, from major stakeholders, keeping the memory-chip maker operating into next year.

A pedestrian walks past the plant of memory chip manufacturers Qimonda and Infineon in the German city of Dresden.

Qimonda warned this month that it could run out of cash early next year if it failed to find an investor or strategic partner. The company's cash reserves have been draining as demand dropped for its DRAM chips used in mobile phones, personal computers and other consumer products.

Qimonda said Sunday it will get a €75 million loan from parent company Infineon Technologies AG, which has a 77.5% stake; a €150 million loan from the German state of Saxony, where Qimonda employs 3,200 employees in the city of Dresden; and a €100 million loan from an unnamed financial institution in Portugal.

The company employs 1,800 in Porto, Portugal.

In addition, Qimonda said it expects to receive guarantees totaling €280 million from Saxony and the German government. Based on such guarantees, Qimonda is in advanced negotiations regarding additional bank financing of €150 million, the company said.

China Readies Big Push Into 3G

As posted by: Wall Street Journal

BEIJING -- China's wireless carriers will invest $40 billion in advanced third-generation networks over the next two years, a top official said, in what could be a boost for China's domestic telecommunication-equipment industry.

China, the world's largest mobile phone market by number of subscribers, is one of the last major telecom markets to adopt third-generation technology, which has higher data-transmission speeds that enable wireless video and other fancy services. Earlier this month, the government said it would award 3G licenses to its carriers by the beginning of 2009, ending a years-long wait by equipment makers. Speaking Friday, Li Yizhong, minister of industry and information technology, predicted at an industry conference that China will spend 280 billion yuan, or about $40 billion, on 3G networks over the next two years.

However, Mr. Li also said that the government would provide "strong support" to China's homegrown 3G technology, known as TD-SCDMA, which is being adopted by China's largest carrier, China Mobile Ltd. The other two global 3G standards, WCDMA and CDMA2000, were developed overseas. That statement reinforces expectations that a greater share of sales for the new 3G networks will go to domestic companies than in the past. Analysts say spending is likely to benefit Chinese telecom equipment makers ZTE Corp. and Huawei Technologies Co., who are the leading suppliers of network equipment to the carriers.

BDA China Ltd., a Beijing-based technology consulting firm, says non-Chinese vendors may struggle to benefit from China's 3G spending. Telefon AB L.M. Ericsson, Alcatel-Lucent SA and Nokia Siemens Networks' total shares together are expected to amount to less than 50% of total spending, BDA says.

Mr. Li's announcement comes as mobile-phone sales are also expected to drop world-wide in 2009, as the global economic decline crimps consumer spending. Research firm Gartner Inc. said last month that global handset sales in the third quarter rose just 6% from a year earlier, compared with 16% in the third quarter of 2007, as fewer consumers purchased replacement models.

Mr. Li said total revenue in China's telecom industry in the first 11 months of 2008 rose 7.6%, but that targets for 2009 have been pared down.

Motorola Moves to Freeze Salaries, Pensions

As posted by: Wall Street Journal

Motorola Inc. moved Wednesday to freeze pensions and salaries, as well as take further steps to conserve cash as plummeting demand for handsets continues to take a toll on the wireless industry.

The Schaumburg, Ill., maker of telecommunications equipment, which is struggling to compete in both the low and high ends of the cellphone market, also said it would suspend contributions to employees' retirement savings plans, just weeks after announcing broad cost reductions and layoffs.

The erosion in cellphone demand has been especially hard for Motorola, as consumers turn to Apple Inc.'s iPhone and Research In Motion Ltd.'s BlackBerry devices and other smart phones.

Slowed carrier and government spending are expected to hit the healthier parts of Motorola, such as its cable set-top box and public-safety radio businesses, whose profits have helped offset nearly $1 billion in operating losses at its mobile devices division so far this year.

"It's clear that the decline in operations is more precipitous than anyone imagined even a few months ago," said David Hamburger, a telecom credit analyst at Citigroup Investment Research. "And it's hitting harder at Motorola than most companies given the competitive pressures in an already slowing wireless market."

Motorola said it would permanently freeze its U.S. pension plans, which mostly serve long-time and retired workers, starting March 1. It will continue to provide funding to meet benefits already vested or earned by employees and retirees, which it earlier estimated would cost $290 million next year. A spokeswoman said the freeze also applies to executive pensions.

Motorola closed its pension plan to new employees in January 2005, instead offering new hires a slightly higher match on contributions to their 401(k) retirement savings plans. The company said it would suspend those matches, which last year cost $116 million, starting in January.

"The sustained downturn in the global economy requires that we take these difficult but necessary steps" to "conserve cash and reduce expenses," Co-Chief Executives Greg Brown and Sanjay Jha said in a statement.

Motorola said most of its employees would receive no salary increase next year. Additionally, the co-CEOs agreed to a 25% cut in their base pay of $1.2 million for next year.

Mr. Brown, who oversees Motorola's noncellphone businesses, will voluntarily forgo his 2008 annual cash bonus, with a target value of $4.2 million, according to David Schmidt, an executive compensation consultant at James F. Reda & Associates. Mr. Jha was guaranteed a cash bonus of $2.4 million when he was hired in August to revitalize the cellphone business, but said he would forfeit the same amount of bonus as Mr. Brown and take the rest as restricted stock.

Save your 401(k): WSJ's Anne Tergesen talks with Adam Najberg about what to do if your company stops matching contributions to your 401(k).

"Based strictly on performance of stock and expected financial results, they do not deserve a bonus," said Mr. Schmidt, recognizing that neither has been in charge of the company for very long.

Over the last few years, Motorola has faced a string of problems as its mega-hit Razr phone lost its luster. Many hoped Mr. Jha would tap the company's innovative roots and bring out a slew of worthy Razr successors, but so far he has focused instead on cutting the complexity of its design and production processes.

With sales atrophying, Motorola pulled back from Europe and other regions to focus on Latin America and parts of Asia. But a recent report by Global Crown Capital LLC suggests a sudden slowdown in the Chinese market, where Motorola has been relatively strong.

Motorola's shares were unchanged at $4.41 in 4 p.m. trading Wednesday on the New York Stock Exchange. They are down 73% over the past year.

Mr. Hamburger of Citigroup said the cost-saving moves may be aimed at conserving cash to pay an estimated $630 million in dividends next year.

No Relief Seen for Chip Makers in '09

As posted by: Wall Street Journal

A grim 2008 is looking like it will be followed by an even worse 2009 for makers of computer chips.

New research from Gartner Inc. and KPMG LLP point to a sharp decline in revenue for chip makers next year, with negative implications for both employment and capital spending for the closely watched industry.

Toshiba Corp. and SanDisk Corp. Tuesday also announced plans for a 30% reduction in production at a joint venture, a response to a glut in chips known as flash memory.

Many semiconductor makers were suffering from plummeting prices and excess production capacity even before the recession's impact began to be felt in September. Conditions appear to have worsened significantly through the fall.

Gartner forecast Tuesday a 4.4% drop in world-wide semiconductor revenue for the year, based on a sudden drop in orders that it expects to trigger a 24.4% plunge in revenue for the fourth quarter. In mid-November, the firm had projected industry revenue would grow 0.2% this year.

Gartner now expects revenue to decline 16.3% in 2009, marking the first time sales have fallen in back-to-back years for chip companies.

"It's just like falling off a cliff," said Amy Leong, a Gartner analyst, of the shift in order rates.

A survey of 85 semiconductor executives by KPMG, scheduled for release Wednesday, reinforces the pattern. The firm, which provides accounting and advisory services to chip makers, says 52% of those surveyed in November predicted revenue to fall in 2009.

Some 70% of the executives surveyed in November expect their companies to decrease their global work force in the next 12 months, and 48% see research and development spending falling.

Virtually all categories of products that use chips have been affected by the slump, including cellphones, PCs and cars. Among chip sectors, the hardest hit have been makers of NAND flash memory -- a mainstay of digital cameras and music players -- and dynamic random-access memory, or DRAM, which is used in computers.

Toshiba and SanDisk said they plan to cut production of NAND chips in January at their operations in Yokkaichi, Japan. Toshiba said it will also halt production of other non-memory chips at three different plants in Japan for as many as 25 days.

While the chip-production cut may help alleviate an oversupply of chips, analysts say it won't necessarily help Toshiba recoup losses from its chip operations.

"The key for a recovery in the global chip sector is demand, not supply. Unless the amount of global chip supply is cut to more than half from the current level, it looks hard to expect a turnaround in chip prices without a recovery in demand," said Kim Hyun-joong, an analyst at Tong Yang Securities.

Samsung Electronics Co., which is No. 1 in shipments of NAND chips, said it has no plans at the moment to cut its output, a Samsung spokesman said.

To learn more about Chip Makers click here.

Clearwire's WiMax Rollout Faces Steep Hurdles

As posted by: Wall Street Journal

Though Clearwire Corp.'s recent merger with Sprint Nextel Corp.'s wireless broadband unit put it on more solid financial and strategic footing, the company still faces a steep climb as it tries to best rivals in the rollout of a new generation of mobile Internet access.

Clearwire hopes to beat rivals by at least two years with a "fourth generation," or 4G, wireless network. It will use a technology called WiMax to provide connections for laptops and smart phones that are about four times faster than today's 3G networks run by Verizon Wireless, AT&T Inc. and Sprint.

Building a nationwide network of WiMax towers quickly will be expensive. The deal with Sprint, which was completed late last month, brought an infusion of $3.2 billion from equity investors including Intel Corp., Google Inc. and several cable providers. That money will go toward initial build-outs in 2009, beginning with the 46 markets where Clearwire already offers a wireless service similar to WiMax through modems or cards that can be inserted in PCs.

But analysts say Clearwire may need $3 billion to $5 billion more to complete the mobile WiMax network. Chris King, a telecom analyst at Stifel Nicolaus, said if the credit markets don't improve, Clearwire would likely have to turn to its strategic equity investors for more capital.

Ben Wolff, Clearwire's chief executive, said in an interview that the company has the option of slowing down its build-out and using cash flow from its initial markets to fund further launches. "There is a scenario in which we'd build a little more slowly and you'd never need any more capital," he said. "Or we could be more aggressive and we'd have to look to acquire more debt or equity in either late 2009 or early 2010."

The strategy of slowing down the build-out to save costs has risks, however, because it might wipe out the effect of Clearwire's head-start in next-generation wireless broadband. "The question is, how much of a time advantage are they actually going to have," said Mr. King, whose model doesn't show Clearwire turning a profit until 2015. (He estimates a $688 million loss for 2008.)

Rival carriers, meanwhile, are moving gradually to a different wireless broadband technology called LTE, or Long Term Evolution. Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, is planning some trials of LTE late next year, with its first real build-out expected in 2010. AT&T, the nation's largest wireless carrier by subscribers, says it won't begin an LTE rollout for at least another two years, but it is planning to upgrade its 3G infrastructure in 2009 to match the speeds of WiMax.

In the U.S., Clearwire's WiMax network could become an outlier once telecom giants Verizon and AT&T launch their LTE networks and LTE chips are embedded in laptops and mobile devices. Mr. Wolff said Clearwire is taking steps to make sure its network can be tweaked later to allow compatibility with LTE, perhaps with a small piece of equipment being inserted into towers.

Mr. Wolff said timing isn't Clearwire's only way to gain an advantage over Verizon and AT&T. He notes Clearwire amassed a huge amount of radio spectrum, which is necessary to provide high-speed mobile Internet access, when it merged with Sprint's WiMax unit. And he said the fact the company doesn't have a cellphone business means it won't be concerned about cannibalizing legacy voice revenue with Web-based services like Internet telephony.

"You won't find us being burdened by the same kinds of constraints," he said.

Apple CEO Will Skip Macworld Trade Show

As Posted by: Wall Street Journal

Apple Inc. said it will no longer participate in the high-profile Macworld trade show after January, adding that Chief Executive Steve Jobs won't be on hand for its final appearance.

Mr. Jobs's keynote at the annual event in San Francisco has been one of the most anticipated events of the year. In recent years, he has used the forum to unveil major products like the MacBook Air laptop and the iPhone.

Apple, of Cupertino, Calif., said its decision to no longer exhibit or hold keynotes at the Macworld reflects a strategy of pulling away from such events in favor of avenues it controls.

Apple said the keynote presentation at this year's show on Jan. 6 will be given by Phillip Schiller, its marketing chief.

Apple's stock fell as much as 5.5% in after-hours trading after the announcement as investors worried that the move was linked to Mr. Jobs's health. Mr. Jobs, who has been the keynote speaker at Macworld since 1997, is a survivor of pancreatic cancer.

Apple led technology shares lower on Wednesday after the tech industry icon's decision not to continue appearing at the annual MacWorld meeting raised questions about the company. (Dec. 17)

Apple didn't comment on whether the decision was related to Mr. Jobs's health, but Gene Munster, an analyst with Piper Jaffray, said he believes that it's part of Apple's strategy to broaden its leadership beyond Mr. Jobs.

"One thing that is clear is that there's a shift in power going on at Apple," said Mr. Munster.

But it could also raise renewed issues about Apple's obligation to disclose what investors regard as material information. "It begs the question of whether they're being fully transparent to investors," said Toni Sacconaghi, an analyst with Sanford C. Bernstein and Co.

Apple has also been scaling back from industry conferences, preferring to hold its own events instead. This year, Apple held two press events in the fall to announce its new iPod and MacBook products. "We will continue doing those as regularly as we have in the past," Steve Dowling, an Apple spokesman, said.

For more information on apple computers click here

Sony to Cut 8,000 Jobs, Close Factories

As posted by: Wall Street Journal

TOKYO -- Faced with deteriorating prices of televisions and a slowdown in consumer spending, Sony Corp. plans to cut 5% of its global electronics work force and shutter up to six factories.

Sony said Tuesday it aimed to reduce the electronics division's annual costs by more than 100 billion yen ($1 billion) by the end of its fiscal year ending March 2010, embarking on one of the most aggressive belt-tightening measures among major electronics companies.

It plans to cut 8,000 of the roughly 160,000 jobs at its electronics division by March, while also targeting at least as many reductions in temporary and seasonal workers.

Like its rivals, Sony is grappling with a global economic slowdown that is sapping demand for new TVs and digital cameras during the crucial holiday shopping season. It is also hurt by the sharp rise in the yen against major currencies, which has cut into profits by reducing its overseas revenue when converted back into the Japanese currency.

The holiday shopping season is providing a critical test for electronics makers, which must not only provide an appealing lineup, but must also entice cash-strapped consumers with major mark-downs on their products. Sony and others lowered prices of some flat-panel TVs by as much as 30% at major U.S. retailers in recent weeks to keep pace with discount brands like U.S.-based Vizio Inc.

Japanese rival Panasonic Corp. last month lowered its earnings forecasts for the fiscal year and slashed capital spending plans in an attempt to weather the downturn. South Korea's Samsung Electronics Co. said Monday that demand was weak across all of its major businesses in the December quarter and that it could cut spending by as much as 30% next year to seven trillion won ($4.8 billion).

Sony already cut its fiscal-year net profit forecast by nearly 40% to 150 billion yen in October, citing weakness at its electronics business and the strong yen. Sony said it will announce the financial impact of its latest cost-cutting plan when it next reports quarterly earnings results in January.

Sony said it plans to close up to six of its 57 manufacturing sites by March 2010. Sony wouldn't disclose specifically where the job cuts would come from, but said they would include Japan.

The company's steps call into question the sustainability of its electronics-business turnaround engineered by Welsh-born American Chief Executive Howard Stringer. Under Mr. Stringer, the first non-Japanese to head the Tokyo-based company, Sony posted a record net profit for the fiscal year ended March 31.

"Even though we were able to improve our own standing with the restructuring plans, the market conditions have worsened to the point that it overtook those improvements," said Naofumi Hara, a senior vice president at Sony. "The No. 1 factor is that the economic environment has gotten far worse than we expected."

Mr. Stringer has pushed the company's electronics division, which accounts for almost 70% of Sony's total sales, to be bold and deliver innovative products like it once did with its iconic Walkman. In recent years, as Sony has restructured, it has seen Apple Inc. wrest control of the portable-music-player industry that it once ruled and has seen Samsung overtake it in TV sales.

Sony said it plans to reduce investment in the electronics business by about 30% in the year ending March 31, 2010. It will also outsource some of the production of certain chips and postpone an investment to expand an LCD television assembly factory in Slovakia.

To combat the yen's rise against the euro, Sony said it would start in January to raise prices on certain products sold in Europe. The company said it also will look to scale back or withdraw from unprofitable or noncore businesses.

Intel Cites Advance in Using Silicon in Data Products; Claim Is Challenged

Intel Corp. is claiming another advance in creating optical communications components from silicon, an effort designed to reduce the cost and increase the speed of transmitting computer data.

The company said it combined silicon -- the low-cost foundation for most computer chips -- with the element germanium to make a device called an avalanche photo detector that achieved record performance. Intel said the development marks the first time that a silicon-based optical component exceeded the performance of an equivalent device made from more costly conventional materials, such as indium phosphide.

But the importance of Intel's announcement was challenged by researchers at Luxtera, a closely held company that is already producing silicon-based optical components.

Optical communications involves encoding information on streams of light particles, generated by lasers. The technology brings big benefits in speed over standard electrical connections, and uses thin glass fibers rather than bulky cables. But optical connections are now mainly used for high-volume long-distance communications -- or connecting servers in massive supercomputers -- because key components often cost tens to hundreds of dollars each.

Researchers are hoping to drive those costs down to pennies by using materials found in conventional chips, a field known as silicon photonics. Intel, in particular, has been churning out a series of research papers describing prototype optical components made from silicon.

Its latest development, which was jointly funded by the U.S. Defense Advanced Research Projects Agency, is described in a paper in the journal Nature Photonics. Intel engineers collaborated with counterparts at Numonyx BV, a company comprised of former operations of Intel and STMicroelectronics NV. Experts at the University of Virginia and the University of California at Santa Barbara provided consulting and testing, Intel said.

Photo detectors are used to sense and amplify light pulses generated by lasers. The new prototype detector achieved a "gain-bandwidth product" of 340 gigahertz, which is the highest result recorded to date on that key metric of detector performance, said Mario Paniccia, who directs Intel's photonics-technology lab and holds the title of fellow.

Improvements in detector performance could be exploited in different ways, including boosting the speed data is sent, increasing the distance a signal goes or reducing the energy needed to send a signal a constant length, Mr. Paniccia said. "And we believe we can continue to improve the performance," he said.

Intel initially expects silicon-based optical components to send data between servers in a computer room and between chips in a system, though it later hopes to have optical connections inside its microprocessor chips, too. Mr. Paniccia said silicon-based detectors also could find uses outside communications, in applications such as optical sensors, cryptography and medicine. He didn't give a precise timetable for turning the new components into products, but indicated it would take several years to perfect the technology.

Meanwhile, Luxtera is "ramping up" production of its silicon-based optical components, said Greg Young, chief executive of the Carlsbad, Calif., company. He said the performance described in Intel's paper is "tremendous." But Mr. Young contends that Luxtera researchers actually were the first to top the performance of indium-phosphide photo detectors in research results published more than a year ago.

Mr. Young also asserted that Intel's technology is incompatible with conventional semiconductor-production processes, so it couldn't be used in a so-called wave-guide detector to work alongside other components on one piece of silicon.

Mr. Paniccia said Intel is developing a wave-guide version that could be integrated on a chip.

And many applications, including inexpensive fiber-optic links to homes, don't require wave guides, said John Bowers, a silicon photonics expert and professor of electrical and computer engineering at University of California-Santa Barbara. "It's a huge paradigm shift," he said of Intel's results.