Infineon Plans Buyback, Dividend After Profit Gain

Infineon Technologies AG, Europe’s second-largest chipmaker, said it will pay its first dividend in a decade and plans a share buyback after fourth-quarter profit beat analysts’ estimates.

Infineon shares rose the most in more than two months after Chief Executive Officer Peter Bauer told analysts on a conference call today that he will propose a buyback of up to 10 percent of the company’s shares at its February annual meeting.

Infineon proposed a dividend of 10 cents a share for the year ended September, the first since a payment for fiscal year 2000. Net income for the three months ended Sept. 30 rose to 390 million euros ($530 million), or 36 cents a share, from 11 million euros, or 1 cent, in the year-earlier quarter, the Neubiberg, Germany-based company said in a statement. That beat analysts’ average estimate of 216.2 million euros.

“From an operational standpoint, everything is better than expected,” analyst Jerome Ramel of Exane BNP Paribas in Paris said. He maintains an “outperform” rating. “They’re going to pay a dividend, which is good news.”

Infineon, whose chips go into cars, mobile phones and other electronic devices, is benefitting like its rivals from higher demand following the economic slowdown, which hurt sales and profit last year. Sales from continuing operations in the quarter advanced to 942 million euros from 609 million euros during the same period a year earlier.

“The last quarters’ excellent performance has continued in the fourth quarter across all the segments,” CEO Bauer said in the statement.

Infineon shares rose 4.24 percent, the most since Aug. 26, to close at 6.22 euros in Frankfurt.

Growing Industry

Infineon’s operating margin -- which it calls the segment result margin -- from continuing operations was 18.2 percent compared with 15.6 percent in the third quarter.

Infineon said Sept. 21 that fourth-quarter results would be better than expected and raised its outlook for the fourth time this year. It predicted that fourth-quarter revenue would rise by about 15 percent from the previous quarter and the operating profit margin would be 18 percent to 20 percent.

In August, Infineon agreed to sell its unit that makes semiconductors for wireless devices such as Apple Inc.’s iPhone to Intel Corp. Infineon said that after the disposal it will get most of its sales from chips for power and energy-efficiency applications such as wind turbines and for cars. Today’s figures excluded results from this business.

Infineon’s growth mirrors that of its rivals. On Nov. 12, Intel, the world’s largest chipmaker, raised its quarterly dividend and said it expects 2010 to be its “best year ever” with “strong cash flows.”

Growth Outlook

STMicroelectronics NV, Europe’s largest semiconductor maker, on Oct. 26 predicted fourth-quarter revenue would exceed estimates on strong demand for chips in cards and consumer products.

Research firm Gartner Inc. said in September that worldwide semiconductor revenue would rise about 32 percent in 2010 to $300 billion. It warned that sales would slow in the second half of the year and into 2011 as the global economic recovery is slowing.

Infineon said today it expects revenue for first quarter of 2011 to be flat or down slightly compared with the fourth quarter depending on foreign exchange rates, particularly the strength of the dollar against the euro. For the full year it expects revenue to grow close to 10 percent, assuming an exchange rate of $1.40 for the euro.

Commerzbank analyst Thomas Becker lowered his rating on the stock to “add” from “buy” and said in his research note that he sees “limited short-term catalysts” with Infineon’s core business already approaching long-term margin targets.

Exane BNP’s Ramel said the forecast is better than he expected because it assumes a strong euro.

Infineon estimates total investments of 550 million euros in fiscal year 2011, up from 325 million euros in 2010. Some of the money will be used to make acquisitions along its main business lines, Bauer said.

To contact the reporter on this story: Allison Connolly in Frankfurt at aconnolly4@bloomberg.net.

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net.

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