Siemens buys Redstone and spins off Infineon

Troubled chip manufacturer Siemens will spin off its semiconductor division into a separate entity one week after the company bought internet outfit, Redstone Communications.

The division, to be called Infineon Technologies, will trade from 1 April, with Siemens taking a 49 per cent stake in the spin-off. A planned dual listing in Germany and the US is expected by the end of this year or 2000.

The move occurs after Heinrich von Pierer, chief executive of Siemens, stated that its earnings performance was better this year than planned and sales growth for 1998/1999 would beat last year's 12 per cent increase.

Siemens semiconductor division had a volatile time, as the DRam market suffered its third bad year in a row due to over-capacity and the Asian market crisis. The division posted a DM1.2 billion loss for the financial year ended 30 September 1998 and was forced to close its wafer plant in North Tyneside.

Von Pierer, who set the semiconductor division a strict target of DM500 million pre-tax profit by the end of 2000, said: 'I am happy that the semiconductor division has done its homework rapidly and with visible success.'

Sukh Rayat, general manager at chip distributor Flashpoint, commenting on Siemens' performance, said: 'People are starting to forecast that things are getting better, but they couldn't get any worse. Prices fell to levels not seen before, but now seem to be stabilising, if not really improving.'

Siemens was estimated to have paid more than $450 million for Redstone, a router developer. It will be merged with Siemens' data networking unit.