Auto-Sector Demand Boosts Infineon

FEBRUARY 1, 2011 THE WALL STREET JOURNAL


By ARCHIBALD PREUSCHAT
DUESSELDORF, Germany—Infineon Technologies AG on Tuesday raised its forecast after net-profit jumped, driven by strong demand from the automotive and industrials sector.
The Neubiberg, Germany-based semiconductor maker now expects full-year revenue growth in a mid-teens percentage range, compared to 10% guided previously. In fiscal 2010, the company posted sales of €3.3 billion.

In the three months ended Dec. 31 net profit surged to €232 million ($317.6 million) from €65 million a year earlier. Revenue for the period rose 34% to €922 million from €687 million, while operating profit was €177 million, up from €70 million a year earlier. The improved figures reflect the recovery in the semiconductor sector after the slump in demand in 2009 as a result of the economic downturn.

The raised sales forecast is fueled by stronger demand from its automotive and industrials and multimarkets segments, which will likely see faster sales growth than the overall group. Infineon also expects profitability to increase despite higher investment in response to continued high levels of order intake.

The company now expects its full-year operating margin in a high teens percentage range, compared to a mid to high teens percentage guided previously. In 2010 Infineon posted an operating profit margin of 14%. Investment for fiscal 2011 is now expected to be €700 million, compared to the previous forecast of €550 million and €325 million in 2010. Infineon also said second-quarter sales will be up slightly from the first quarter.

"The current outlook isn't overly aggressive," Chief Executive Peter Bauersaid in a conference call. Infineon raised guidance four times in fiscal 2010.

Expanding capacity could also improve margins at some operations, Mr. Bauer added. Infineon plans to expand capacity by 5% in the second quarter and by 3% to 5% in the following quarters. Mr. Bauer still sees tight supply for logic chips in the automotive sector for some months.
"Targeting less volatile, high-margin markets, driven by the worldwide trends towards more energy efficiency, mobility, and security is the right strategy for Infineon," Mr. Bauer said.
In August Infineon said it was selling its wireless operation to chip giant Intel Corp. in a $1.4 billion all cash deal. The deal closed earlier this week. Infineon now focuses on logic chips used in cars, machines and security solutions, as well as those used in passports.
Write to Archibald Preuschat at archibald.preuschat@dowjones.com