Infineon Predicts Sales to Drop as Much as 10 Percent

Infineon Technologies AG (IFX), Europe’s second-biggest semiconductor maker, predicted sales and profitability will decline in the three months through December as clients cut spending amid the economic slowdown. The stock dropped 6.1 percent.

Revenue will drop as much as 10 percent from the previous quarter while operating profit will decline to between 5 percent and 7 percent of sales from “close to” 12 percent, the company said in a statement today. Infineon also predicted fiscal fourth-quarter sales through September will be “slightly down” compared with the third quarter.

The company, whose customers include carmaker Bayerische Motoren Werke AG and consumer-electronics company Royal Philips Electronics NV, said July 31 it will reduce spending to cope with slowing chip demand. The spending cuts will mean trimming capacity expansion rather than delaying development of technologies such as 300-millimeter wafers, Neubiberg, Germany- based Infineon has said.

‘Slowing Economy’

“The slowing economy hits Infineon via its clients,” said Jan Goehmann, an analyst at Norddeutsche Landesbank Girozentrale in Hanover. “Especially the car sector and industrial clients seem to be reducing their orders.”

Infineon dropped 33.4 euro cents to 5.11 euros in Frankfurt trading today. The shares have lost 12 percent this year, while Germany’s DAX benchmark index gained 26 percent.

The global semiconductor industry will shrink 2 percent in 2012, equity researcher Exane said this month, after previously predicting an increase of 1 percent. The industry’s third- quarter results and fourth-quarter guidance are likely to disappoint investors as inventories are high and year-end demand looks weak, Exane said at the time.

Infineon, which is counting on demand for chips that replace mechanical parts in cars, manage power in home appliances and wind turbines, and secure passports and contactless payment cards, said it will “will define and implement measures to improve profitability beyond the first quarter.”

Missing Estimates

The credit rating of STMicroelectronics NV (STM), Europe’s largest chipmaker, was placed under review for a possible cut by Standard & Poor’s last month.

STMicro predicted in July third-quarter revenue would grow by about 2.5 percent from the previous period, indicating sales may miss analysts’ estimates amid weaker demand. Chief Executive Officer Carlo Bozotti said at the time that the global economy was softening and the company had weaker bookings toward the end of the second quarter, a trend that was continuing at the beginning of July.

“Infineon is in a cyclical industry and its competitors are not doing much better,” said Thomas Hofmann, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart with a “hold” recommendation on the stock. “Demand for chips from industrial clients is low and will only pick up once the economy is picking up.”

To contact the reporter on this story: Joseph de Weck in Frankfurt at jdeweck@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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