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Infineon Shares Decline as Steeper Fall in Revenue Is Forecast

Infineon Technologies AG CEO Peter Bauer
Infineon Technologies AG CEO Peter Bauer. Photographer: Guenter Schiffmann/Bloomberg

Infineon Technologies AG, Europe’s second-largest maker of semiconductors, forecast a steeper decline in sales than analysts’ projections, sending the stock as much as 6.2 percent lower.

Revenue in the year through September 2012 will fall by a “mid-single-digit percentage,” Neubiberg, Germany-based Infineon said today. That compares with the 1.8 percent drop average of 23 analyst estimates compiled by Bloomberg. Automotive division sales will be “slightly better” than the company average while revenue for the industrial unit, chip cards and security business will be “slightly worse,” it said.

Infineon and Texas Instruments Inc., the largest maker of analog semiconductors, reduced sales forecasts in October because of sluggish demand for components that go into windmills, personal computers, washing machines and missiles. Slowing global economic growth is making businesses hesitant to buy components, Infineon Chief Executive Officer Peter Bauer said today.

“It’s been difficult to estimate because customers won’t give a forecast for their orders into 2012, but we dare to make an assessment and we believe we are on the safe side,” Bauer said on a conference call.

Stock Drops

Infineon fell as much as 40 cents to 6.05 euros in the biggest intraday drop since Nov. 1, and was down 3 percent at 11:23 a.m. in Frankfurt. The stock has lost 10 percent this year, valuing the company at 6.8 billion euros ($9.2 billion).

U.S. economic growth is close to a “stall speed” that increases the odds of recession, Nathan Sheets, Citigroup Inc.’s global head of international economics, said in a Nov. 11 report. Economic expansion in the countries using the euro failed to accelerate in the third quarter, with the region’s gross domestic product rising 0.2 percent from the previous three months, matching the second-quarter gain.

Technology-industry research company Gartner Inc. said in September that chipmakers may need a few quarters to reduce inventories.

Infineon has had “a good run and now it’s normalizing,” Eerik Budarz, an analyst at Silvia Quandt Research GmbH in Frankfurt, said by phone. “On the one hand, this is about the economy, and on the other, this is cyclical.” Budarz has an “avoid” recommendation and a 5.40-euro share-price estimate on Infineon.

Quarterly Forecast Reduced

The German chipmaker also cut its sales forecast today for the first quarter ending Dec. 31, saying revenue will decline by about 10 percent, down from a previous outlook of a “mid-to-high single-digit” decline. The margin for its main operating units will be about 13 percent to 14 percent of sales, versus a company forecast four weeks ago calling for a margin in the “mid-teens.”

For 2012, Infineon expects the margin for its main operating segments to be a “low- to mid-teens percentage of revenue.”

Fiscal second-half revenue is likely to “go up again,” and the company is “holding firm” to targets of an average 10 percent annual sales growth and 15 percent margin over the course of the business cycle, Bauer said.

Download: Earnings

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