Infineon, ARM jump on Apple results, takeover talk

LONDON/FRANKFURT Wed Apr 21, 2010 9:06am EDT

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LONDON/FRANKFURT (Reuters) - Shares in European chipmakers ARM (ARM.L) and Infineon (IFXGn.DE) jumped on Wednesday on rumors of possible interest from larger suitors and blockbuster results from Apple (AAPL.O) overnight.

Apple reported first-quarter results on Tuesday that beat expectations on strong iPhone sales, and it gave a better-than-expected revenue forecast.

The news boosted shares of chip suppliers such as Infineon and STMicroelectronics (STM.PA), who supply chips to Apple's products, which also use ARM designs.

Shares in Infineon and ARM were also lifted by takeover talk, with traders mentioning Intel (INTC.O) as a potential acquirer of Infineon.

Infineon's stock was up 4.2 percent by 1245 GMT. ARM shares gained 4.3 percent to an eight-year high, valuing the company at more than 3.3 billion pounds ($5.08 billion), while STMicro rose 1.3 percent.

Infineon trades at around 15 times 12-month forward earnings per share, while ARM and STM trade at 31 and 16 times estimated earnings, respectively.

That leaves Infineon trading at a 14 percent discount to peers, according to Thomson Reuters StarMine, which weights analyst estimates according to their track records. ARM trades at a 42 percent premium.

Infineon and Intel declined to comment on takeover speculation and industry experts were divided on the likelihood of such moves.

"I think it's very unlikely that Intel are going to go and buy Infineon," said Richard Windsor, global technology specialist at Nomura.

He cited the fact that Intel had made expensive wireless acquisitions in the past but ended up selling many of the assets after failing to integrate them.

Some analysts have said it would make sense for Intel to buy Infineon's wireless business but Infineon Chief Executive Peter Bauer told Reuters last month he saw no reason why the chipmaker should not try to further develop the business.

Bauer told Reuters in December the company wanted to stay independent.

STRATEGIC SENSE?

Theo Kitz, technology analyst at private German bank Merck Finck, argued that in light of Infineon's development in the past year Intel might want to consider acquiring a large stake.

"It would make sense to buy Infineon. A simple majority is all that's needed," he said. "Infineon has done well, saved itself from financial ruin last year, and is well positioned in so-called megatrends such as energy efficiency and renewables."

But some wondered why Intel did not make a move a year ago when Infineon stock fell as low as 34 cents. In March last year, Infineon dropped out of the German blue-chip DAX index .GDAXI because it did not fulfill market capitalization requirements.

It rejoined the DAX in September and now has a market value of 5.5 billion euros.

The Financial Times reported renewed speculation that ARM could be a takeover target, mentioning Apple as a possible suitor.

"ARM is up on a combination of bid speculation in the press today and Apple's strong results last night, said one London-based analyst.

Analyst Lee Simpson at Jefferies & Co said a move by Apple on ARM was not credible considering ARM's lofty valuation.

"It's not cheap and if you stick in the usual 30-40 percent premium to fend off counterbids you are talking a heck of a lot of money for what garners most of that value for being a ubiquitously used technology."

Apple, which typically offers conservative forecasts, projected revenue of $13 billion to $13.4 billion in the June quarter. Wall Street had forecast revenue of $12.97 billion.

The company sold 8.75 million iPhones in the March quarter -- more than double the figure of a year ago and way above estimates -- driven by strong, broad-based, international demand for the smartphone, some of it due to the addition of new carriers in key overseas markets.

Analysts saw little impact for Nokia (NOK1V.HE), whose shares were 0.2 percent higher in Helsinki, because Nokia's cheaper phones rarely compete with the high-end iPhone.

(Reporting by Paul Sandle and Georgina Prodhan in London, Nicola Leske, Kirsti Knolle in Frankfurt, Tarmo Virki in Helsinki, Dominic Lau and Atul Prakash in London; Editing by Jon Loades-Carter and Michael Shields)

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