Bloomberg News

Infineon Shares Rise as 2012 Outlook Improves: Munich Mover

February 01, 2012

Feb. 1 (Bloomberg) -- Infineon Technologies AG rose the most since September after saying sales in the current quarter will at most fall slightly from its fiscal first-quarter, when revenue dropped 9 percent sequentially.

The operating margin in the quarter ending March 31 will fall by about 1 percentage point from 14.9 percent in the first quarter, the company, Europe’s second-largest semiconductor maker, said in a statement today.

“For those of us who have covered Infineon for many years, the fact that they are guiding to a 14 percent margin at what is likely to be the bottom of the cycle is a function of how far the company has come from its loss-making past,” Sandeep Deshpande, an analyst at JP Morgan, said in an e-mail. He has an overweight rating with a 9.25 euro target price on Infineon.

Infineon said it sees “continued confidence” from automotive customers and “some early signs” of stabilization in the market for chips for security on credit and identity cards while “seasonal weakness” will drive a decline in chips that improve power efficiency and go into wind turbines. IHS iSuppli said yesterday that semiconductor industry sales will rise by “a slight 3.3 percent” to $323.2 billion this year, because of “the ambiguous state of the global economy, along with assorted troubles in the world’s major markets.”

‘Slightly More Positive’

The shares of the company, which is based in the Munich suburb Neubiberg, Germany, rose as much as 5.8 percent and were 4.5 percent higher at 7.29 euros at 12:08 p.m. in Frankfurt trading, making it the best performer on the DAX index today.

While the chipmaker confirmed its forecast for the fiscal 2012 that ends Sept. 30, Chief Executive Officer Peter Bauer said his view on the year is “slightly more positive” now than three months ago when Infineon said sales are expected to fall by a “mid single-digit” percentage and the operating margin will be a “low to mid-teens.”

“The consumer, computing, and telecommunication markets have probably reached the floor in the current quarter,” Bauer said on a call with analysts today. “It’s still kind of unpredictable where the industrial business will go during the year, so we stick to a decline, but with a slightly more positive mood than before.”

Operating profit first quarter, ended Dec. 31, fell to 141 million euros ($184 million) from 177 million euros a year earlier as sales rose 2.6 percent to 946 million euros, coming in ahead of the average operating profit of 127 million euros and sales of 934 million euros that analysts polled by Bloomberg had estimated.

‘Strong Resilience’

“Infineon has proven strong resilience in recent months and, in line with peers, is about to face a better-than-typical seasonality in the second quarter, likely the inflection point for a semi industry recovery, following recent de-stocking,” Bernd Laux, an analyst at Cheuvreux in Frankfurt, said in an e- mail. Laux has an “outperform” rating on the stock.

Intel Corp., the world’s largest chipmaker, said Jan. 19 that first-quarter revenue may top analysts’ estimates as personal computer production rises again and as investments in data centers made up for weakness related to Europe’s credit crisis. Texas Instruments Inc. last week reported fourth quarter sales that exceeded estimates, suggesting the industry may be nearing the end of a sales slump.

Infineon’s first-quarter net income fell to 96 million euros, compared with 232 million euros a year earlier, which included the wireless chip unit that was sold to Intel. Analysts had estimated net income of 104 million euros. The operating margin was 14.9 percent in the quarter compared with the estimate in the survey of 13.5 percent.

--Editors: Kim McLaughlin, Robert Valpuesta.

To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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