Feb. 6 (Bloomberg) -- Infineon Technologies AG, Europe’s second-largest maker of semiconductors, rose 13 percent in German trading after saying it would deepen cost cuts and lower investments to preserve cash.

Infineon targets 600 million euros ($767 million) in annual savings, up from a December target of 250 million euros. Infineon also cut its 2009 budget for investments in property, plants and equipment to about 200 million euros from 250 million euros, the Munich-based company said in statement today.

Business may deteriorate for the industrial, chip card and wireline communications units this quarter, Infineon said, indicating the economic slowdown is spreading beyond autos and mobile phones. The company has said it will ask shareholders at the annual general meeting on Feb. 12 for approval to raise as much as 450 million euros in capital as a “precautionary measure.”

“Infineon did a good job in cost savings and cash flow management during the quarter,” Guenther Hollfelder, an analyst at UniCredit in Munich, wrote in a note today.

About 85 percent of announced job cuts had been completed by the end of 2008, Infineon said. The company announced in July it would eliminate about 3,000 jobs, or 10 percent of its workforce.

Infineon rose 9.5 cents to 82 cents in German trading. The stock has lost 15 percent this year and dropped 88 percent in 2008.

Topping Estimates

The fiscal first-quarter net loss attributable to shareholders of the parent company was 374 million euros, compared with a revised loss of 409 million euros a year earlier. Sales fell 24 percent to 830 million euros. Analysts had predicted a loss of 547 million euros and revenue of 807 million euros, the medians of six estimates in a Bloomberg News survey.

Revenue will fall about 10 percent this quarter from the previous one, though it’s difficult to predict because of the economic slowdown, Infineon said. The “drastic” cooling in the economy will have “a severe impact” on demand, Infineon said.

The auto and wireless communications businesses may hold up better after a “significant decrease” in demand last quarter, it said. Infineon’s other businesses -- industrial, chip card and wireline communications -- will be “more severely affected by the continuing slowdown,” the company said.

“Infineon provided a clearly less dismal sales outlook compared to its competitors,” UniCredit’s Hollfelder said.

Infineon didn’t comment on its Dec. 3 forecast that sales will fall 15 percent in the year ending Sept. 30, 2009, from 4.32 billion euros the previous year.

Cost Measures

Additional savings have already been implemented or will happen soon, the company said. They include reduced work hours at the German production sites in Regensburg and Dresden, a changed bonus plan and a “very stringent travel policy.” Infineon also left the employers’ union in November 2008 so it could be more flexible in wage adjustments.

Infineon said the new measures aren’t expected to cost more or lead to increased cash outflows.

“Despite extremely challenging market conditions, our first quarter results held up reasonably well,” Chief Executive Officer Peter Bauer said in the statement. “We successfully focused on liquidity management, contained cash outflows and lowered our debt.”

Infineon increased its provisions for memory-chip maker Qimonda to 195 million euros, after the unit sought protection from creditors on Jan. 23. Infineon owns 77.5 percent of Qimonda.

Infineon said in 2007 that it wanted to cut its stake in Qimonda, which has been hurt by falling chip prices. Prices of the benchmark 1-gigabit memory chip have dropped 49 percent in the past year, according to Dramexchange Technology Inc., Asia’s largest spot market for the chips.

Michael Jaffe, Qimonda’s insolvency lawyer, has been to Portugal to meet potential investors and his team is scheduled to travel to Asia this week to meet with possible investors there.

Last week, STMicroelectronics NV, Europe’s largest chipmaker, posted a loss in the fourth quarter and said it would cut about 4,500 jobs this year to save money.

On Jan. 27, Texas Instruments Inc., the second-largest U.S. chipmaker, said it would cut 12 percent of the workforce.

To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net

Last Updated: February 6, 2009 11:38 EST