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Infineon Raises Forecast Again as Net Beats Estimates (Correct)
(Corrects story published July 28 to show that Infineon last paid a dividend in 2001 in the 11th paragraph.)
Infineon Technologies AG, Europe’s second-largest chipmaker, raised its fiscal 2010 forecast for a third time on semiconductor demand from makers of cars and consumer electronics.
Infineon, which today reported third-quarter net income that beat analysts’ estimates, said in an e-mailed statement that revenue growth this year will be at the “mid-to-high” 40s-percentage level. Sales fell 22 percent last year to 3 billion euros ($3.9 billion) as companies put spending on hold and consumer demand dropped. The forecast assumes an exchange rate of $1.3 to the euro.
“This quarter is going to be very strong,” said Guenther Hollfelder, an analyst with UniCredit Group in London who has a “buy” rating on Infineon. The main driver for growth will be the wireless business, “where they have customers like Apple, Samsung and Nokia,” he said.
Infineon and competitors including Intel Corp. are riding a revival in demand for semiconductors that power everything from electronic toys to cars and industrial systems. Intel, the world’s biggest chipmaker, this month reported record second- quarter sales and topped analysts’ estimates with its forecast, showing a rebound in technology spending.
Infineon shares climbed 2.6 percent to close at 5.18 euros as of 5:30 p.m. in Frankfurt trading. The stock has risen 34 percent this year.
Profit Margin
Infineon’s full-year operating profit margin -- which the company calls segment result margin -- will be a “low teens percentage” of revenue, the Neubiberg, Germany-based company said in today’s statement. Previously, Infineon said revenue would grow by a “high 30s percentage” year-on-year, and the operating margin would be higher than 10 percent.
“We have come a long way in improving profitability,” Chief Executive Officer Peter Bauer said in today’s statement.
He said Infineon is “beginning to take aim at our ambitious goal” of a margin at 15 percent, compared to 13.5 percent in the third quarter and 10.6 percent in the second.
In the third quarter ended June 30, the company had net income of 126 million euros compared with a loss of 23 million euros a year earlier. The average estimate for net income was 115 million euros, based on 10 analysts surveyed by Bloomberg.
The latest period was the company’s fourth consecutive quarter of profit after combined losses of more than 3.9 billion euros in the 10 previous quarters.
Dividend
Asked if the return to profitability will spur the company to pay a dividend, Chief Financial Officer Marco Schroeter said no decision has been made. Infineon last paid a dividend in 2001, for the fiscal year 2000.
Revenue in the quarter rose 59 percent to 1.21 billion euros compared with analysts’ average estimate of 1.12 billion euros. From the previous quarter, it was up 17 percent, beating Infineon’s own forecast of a “high single-digit percentage” sequential increase.
The Semiconductor Industry Association and researcher Gartner Inc. raised their forecasts for the industry in June, saying, respectively, that global chip sales will grow 28 percent and 27 percent this year.
“In general we expect mid-single digit year-over-year growth for the semiconductor industry starting from the fourth quarter,” UniCredit’s Hollfelder said. He expects demand to stabilize rather than grow strongly. “For Infineon, there are some sweet spots with their smartphone exposure - the iPhone and the Galaxy S - which should be among the best-selling smartphones in the second half.”
Wireless Unit
Infineon, whose chips go into Samsung Electronics Co. Ltd’s Galaxy S phone and in Apple Inc.’s iPhone, is weighing options for its wireless semiconductor unit, including a sale, two people familiar with the situation said June 15. It hired JPMorgan Chase & Co. and opened a data room for potential buyers to review the books, one of the people said.
CEO Bauer declined to comment on reports of a sale of the business. Hollfelder said it might make sense for Infineon to dispose of the wireless business.
“In automotive and industrial they are the no. 1 and these are high-margin businesses with long product cycles,” Hollfelder said. “In the wireless business, product cycles are a lot shorter, R&D requirements are higher and it’s a more competitive market with Japanese Renesas as a new entrant.” He said similar transactions were valued at 1.5 times sales.
In the first nine months of fiscal 2010, wireless business sales were at 883 million euros, up 35 percent from the same period last year. Growth in the third quarter was mainly due to a “ramp-up of new smart phone and entry-level phone platforms at several major customers,” Infineon said. A stronger U.S. dollar against the Euro also lifted revenue.
To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net
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