UPDATE 3-Infineon's outlook dire as downturn, Qimonda weigh

* Sees 2009 operating loss, sales down 15 pct

* Q4 EBIT loss 220 mln euros, below expectations

* Says Qimonda book value zero; still seeking solution

* Doesn't rule out capital increase

* Shares tumble 29 percent

(adds CEO comment, analyst comment, updates share price)

By Nicola Leske

NEUBIBERG, Germany, Dec 3 (Reuters) - Chipmaker Infineon, hit harder than expected by the economic downturn, warned on Wednesday that its already bleak prospects for 2009 may worsen if its memory chip unit Qimonda QI.N folds and it fails to cut more costs.

The German group, which has suffered a double body-blow from the dramatic slowdown in the auto sector and its continued exposure to the ailing Qimonda, which mainly serves the computer industry, raised the prospect of tapping shareholders for further funds as it forecast an operating loss and a double-digit decline in sales for 2009.

Infineon (IFXGn.DE) reported fourth-quarter results far below expectations and for the first time backed away from pledges to find a solution by February for Qimonda, which it said was now booked in its accounts with a valuation of zero.

It said it expects sales in its current first quarter to drop around 30 percent from the previous quarter and forecast a fall of at least 15 percent for the whole of 2009 amid a global economic slowdown and production cuts in the automotive industry, for which it is Europe's biggest chip supplier.

Infineon also expects an operating loss in 2009, excluding one-offs.

Its shares (IFXGn.DE) nosedived on the news, falling 29 percent to 1.17 euros by 1132 GMT on what analysts called a very weak outlook.

Infineon's downbeat comments added to a string of warnings across the chip industry as the global economic downturn forces consumers to cut spending on new computers, cellphones and cars.

Rival STMicroelectronics (STM.PA) last week lowered its outlook for the current quarter and Intel (INTC.O), the world's top computer chipmaker, cut its fourth-quarter sales target by about 14 percent last month. [ID:nLS635066]

'SWORD OF DAMOCLES'

Infineon spun off and listed Qimonda in 2006 in the hope of cutting its exposure to the volatile memory chip market.

It has been trying to find a buyer for most of the 77 percent of Qimonda it still owns by the time of its annual general meeting in February.

It now said there can be no assurance that the plan can be achieved by that time, though it was still working towards finding a solution by then, said Chief Financial Officer Macro Schroeter.

Qimonda had said on Monday it was making progress in talks with strategic and financial investors but also warned it faced a cash crunch by early next year if talks do not pan out.

Should Qimonda not be able to meet its obligations, Infineon said it may be exposed to "certain significant liabilities" related to the Qimonda business.

The book value of the unit was now zero, and Infineon could not rule out making a capital increase, Schroeter said.

Commerzbank said in a note to clients: "Qimonda is more than ever the sword of Damocles over Infineon's share price and financials. We downgrade our rating to 'reduce' from 'buy' and cut our target price to 1.50 euros from 3.30 euros."

Infineon is trying to compensate for a market glut by cutting more than 250 million euros ($316 million) in costs by the end of its 2009 fiscal year. Bauer also said the company would freeze pay and temporarily shut some operations.

But the company said the savings were likely to be more than offset by its falling revenue expectations.

DZ Bank analyst Harald Schnitzer said Infineon may encounter more challenges when it needs to repay bonds due in 2010.

But Chief Executive Peter Bauer said the company "has time and air for refinancing of corporate bonds".

Infineon had a fourth-quarter operating loss of 220 million euros compared with EBIT of 71 million in the third quarter. Sales were 1.153 billion euros.

Infineon stock has lost almost 80 percent in value since the beginning of the year and underperformed the German blue-chip index DAX .GDAXI by around 62 percent.

To read the Reuters poll on Infineon's fiscal fourth-quarter results, please double click on [ID:nLS222277].