UPDATE 2-Infineon cuts investments in face of tough economy

Wed Nov 14, 2012 6:51am EST

Related Topics

* Sees fiscal 2013 revenue down 5-9 pct

* To cut investment to 400 mln euros, from 890 mln

* Fiscal Q4 operating profit in line with forecast

* Shares up 4.3 percent (Adds shares, analyst comment)

By Harro Ten Wolde

NEUBIBERG, Germany, Nov 14 (Reuters) - German chipmaker Infineon said a darkening economic outlook will likely hit industrial clients in its 2012/13 year and it will cut planned investments.

The global chip market is going through a rough period as sectors from consumer electronics to automotive slow. Chip sales this year are down 5 percent, according to the Semiconductor Industry Association

"Macroeconomic headwinds are getting stronger and we do not see this changing in the near term," chief executive Reinhard Ploss said on Wednesday.

Infineon said it would cut full-year investment to 400 million euros ($508 million) from a planned 500 million and compared with 890 million in its 2011/12 year to end-September.

Infineon shares, which had been heavily shorted this week ahead of the results, were up 4.3 percent by 1145 GMT and at the top of a 0.5 percent stronger technology index.

Analysts welcomed the budget discipline and a stable 0.12 euro dividend. "Continuation of the dividend payment is a good sign," DZ Bank analyst Harald Schnitzer said.

The company reported a 41 percent drop in fourth-quarter operating profit, excluding special items, to 116 million euros, in line with the forecast in a Reuters poll.

"Global economic uncertainties caused by high public-sector debt levels in Europe caused customers to be increasingly cautious in their willingness to spend," the company said.

Infineon also said it expected full-year revenue to fall 5-9 percent, with an operating margin of 5-9 percent of revenue.

That is mainly the result of worsening conditions at its clients in the industrial sector, which accounts for about a fifth of its operations.

Infineon said it planned to cut costs through measures such as temporarily switching off underutilised equipment, reducing temporary staffing and selective use of shorter working hours.

The measure were expected to yield 100 million euros annual cost savings.

The automotive unit, which with more than 40 percent of group revenue is Infineon's most important unit, was expected to do better than other units.

Infineon said revenue will remain at low levels in the first half of its year and improve considerably in the second half. ($1 = 0.7867 euro) (Editing by Dan Lalor and David Goodman)

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