Qimonda: Heading for Insolvency?

Qimonda (QI) shares are down sharply today as worries increase about the company’s ability to extricate itself from a severe cash crunch.

Cowen’s Daniel Berenbaum this morning writes that management may have missed the window to sell its assets at a reasonable price. He says insolvency is “a very real possibility,” with Micron (MU) the most obvious beneficiary, with a chance to buy up assets at fire sale prices.

Berenbaum contends Qimonda has under two quarters of operating cash left. He says it is difficult to come up with a scenario where cash flow from operations turns positive in the next year; and he says the company will be “hard pressed to secure additional financing.” Concludes Berenbaum: “With no white knight in sight, we don’t see how the company will be able to continue operations in its current form much beyond the end of the year.”

Berenbaum today cut his estimates for the company; he now sees a loss of $6.99 a share this year and $3.77 next year; previously his loss estimates were $6.71 for this year, $2.58 for next year.

Meanwhile, Berenbaum also chopped estimates on Micron. His loss estimate for this year is now $1.21, versus $1.17 previously. For next year, he now sees a loss of 48 cents, versus 36 cents previously. “It’s tough to see how MU stock can move sustainably higher given continued weak memory industry fundamentals,” he writes, “but at current valuations it seems to be pricing in a worst-case dilutive acquisition of floundering competitor QI.” But he thinks MU will simply wait for QI to fall, and then pick up the pieces on the cheap.

Qimonda today has tumbled 51 cents, or 28%, to $1.32. Micron is up 2 cents, or 0.43%, to $4.69.