“If the overall economy remains strong, then yes our assumption might be a bit conservative,” Bauer said today in an interview at the company’s headquarters in Neubiberg, south of Munich. “But being cautious is not bad at this point in time, given that no one knows what is going to happen with the overall economy in the second half of the year.”
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 in fiscal 2009. The company on Nov. 16 said sales in the 12 months through September 2011 may grow by close to 10 percent, assuming an exchange rate of $1.40 for the euro.
“Infineon delivered an impressive turnaround as the company went from being one of the worst-performing big German companies to a fast-growing, profitable and stable business,” said Boris Boehm, who helps manage 1 billion euros ($1.32 billion) at Aramea Asset Management in Hamburg, including Infineon shares “‘They’re now in the right markets and have the right management.”
Bauer said today he’s now more optimistic about the current quarter than one or two months ago, after the weakening of the euro and a “very strong order pattern” for the industrial and multimarket unit.
Infineon said last month it expected revenue for the first quarter of fiscal 2011 to be flat or down slightly compared with the fourth quarter depending on foreign exchange rates.
“Infineon seems to enjoy either very good market share gains or a very robust portfolio at the moment with regard to the overall market situation,” Bauer said today.
To meet demand, which currently outstrips production capacity, the company said in November that it would raise capital expenditure in fiscal 2011 to 550 million euros from 325 million euros in 2010. This will be equivalent to between 13 percent and 15 percent of sales this year, Bauer said today. Next year, capital expenditure will likely remain at the same level, and then stabilize at about 10 percent in the long term, he said.
Revenue from continuing operations grew by 51 percent in the year ending Sept. 30, reflecting the recovery of the semiconductor industry since the economic crisis. Infineon is a different company now, with the disposal of the restructured wireless unit to Intel Corp. marking a shift toward more stable businesses.
Before the Intel deal, Infineon disposed of its unprofitable Qimonda memory-chip unit to reduce its dependence on markets with volatile demand and prices. Infineon was itself sold by Siemens AG, Europe’s largest engineering company, in an initial public offering in March 2000. Munich-based Siemens sold its remaining Infineon shares in March 2006.
Bauer said today he sees “no slowdown” at the automotive unit, and the industrial unit has “terrific opportunities.” Infineon also has a smaller security and chip card unit.
Infineon has the ear of companies from Audi AG to China’s Chery Inc. that are looking to safely replace more expensive mechanical parts. The automotive chip market is set to grow to $26.3 billion in 2014 from as much as $15.1 billion last year, a compound annual growth rate of about 12 percent, according to researcher iSuppli. Infineon expects chip content in each car to rise to $333 in 2016 from $251 in 2008.
“We’re happy with our portfolio,” Bauer said today. “Energy-efficiency, mobility and security are wide enough market spaces in order to grow for the next 15 or even 20 years.”
Bauer isn’t in a “hunting modus” for acquisition targets. There isn’t a trend for consolidation, so he’s not concerned that someone will snatch “the nicest brides,” Bauer said.
Growing by acquisitions is “risky” and is only a means to gain big advances in technology, Bauer said. “I’m less and less worried about takeover situations,” he said. “If you look at the current share price, Infineon is kind of a big fish.”
The stock has risen 79 percent this year, giving the company a market value of 7.56 billion euros.
Infineon said last month it planned a dividend of 10 euro cents for the past fiscal year, the company’s first dividend in a decade.
“The dividend is a demonstration that Infineon has a stable business model now,” Bauer said. Shareholders shouldn’t expect “astronomical” dividend payouts, he added.
Infineon will start buying back shares if shareholders approve it at the annual general meeting in February, and it will keep cash on the balance sheet for a longer period “to make use of opportunities which I can’t identify now or immediately,” Bauer said.
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