Infineon Technologies AG (ADR) (NASDAQOTH:IFNNY)

CAPS Rating: 1 out of 5

The Company designs, develops, manufactures and markets a broad range of semiconductors and complete system solutions used in a wide variety of microelectronic applications.

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Player Avatar NetscribeSemiCdr (45.57) Submitted: 2/16/2007 7:39:36 AM : Underperform Start Price: $15.15 IFNNY Score: +80.24

Infineon Technologies designs, develops, manufactures and markets a broad range of semiconductors and complete system solutions targeted at selected industries. The company’s products are used for the applications in the wireless and wireline communications, automotive, industrial, computer, security and chip card markets. Infineon operates in three segments: Automotive, Industrial and Multimarket, Communication Solutions and Qimonda.

In the first quarter of the fiscal 2007 the company reported a decline in the revenues by 7% as compared to previous quarter. The memory chips have been the most important products in the company’s portfolio contributing towards majority of its operating profit. But due the volatility of this market the company has faced three successive years of net losses and hence it is adopting a strategy of moving away from memory chip business and nurturing more profitable business like mobile-phone chip market. There is a lot of uncertainty onto whether the company can capture a share of this market as the market is highly competitive, hence creating further risks for the company. Adding to the agony of Infineon, its competitors partnered with handset giants like Motorola and Nokia, whereas it partnered with its parent Siemens, whose handset business went bankrupt in 2006 after steadily losing share.

The company is relying on its Comms division for future growth; this can be a risky proposition as the company has not been able to make good money from this division despite of its large share in the RF chip market. Moreover, the company is divesting its Qimonda memory chip group which can cause problems for the company in the near future looking at its profitable contributions in the past. Although the company is promising to build profits in the coming months, the share price is not expected to follow the suite.

Member Avatar NetscribeSemiCdr (45.57) Submitted: 5/28/2007 4:43:33 AM
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Infineon Technologies had its eighth loss in nine quarters, which is a setback for the strategy of Chief Executive Officer Wolfgang Ziebart, who is focusing on tailor-made semiconductors for cellular phones, credit cards and cars to make earnings more stable. He plans to exit the Qimonda memory-chip unit because the segment is more prone to swings in demand than its other businesses. The company posted a loss of 11 million euros ($15 million) in the second quarter of 2007, with the revenues falling 1.6 percent to 1.96 billion euros. The CEOs strategy to reduce the stake in Qimonda is not working in the company’s favor. Qimonda, which accounts for about half of Infineon's revenue, posted a fiscal second-quarter profit of 57 million euros, compared with a loss of 9 million euros a year earlier. Rising sales of Apple's iPod music players and Nokia's cellular phones spurred orders for Qimonda's chips. Quimonda's sales rose 6 percent to 984 million euros in the second the second quarter of 2007. Excluding Qimonda, Infineon sales fell 8 percent to 978 million euros ($1.33 billion) from 1.06 billion euros a year earlier.Moreover, DRAM prices have fallen more than 50% since the beginning of the year. Given ongoing weak DRAM fundamentals at the moment it is expected that the company will report heavy loss in the current quarter on the back of the severe price decline over the past weeks. The company is strategically trying to move towards the mobile handset chip market which is a highly competitive. Additionally it is relying on its Communication Solutions division for the firm's future growth, which is a risky proposition.Looking at the current scenario it can be expected that the company will not be able post profits for coming several quarters which can lead to a decline in its share price in the coming months.

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