Infineon, Qimonda shares soar on loan, aid option
FRANKFURT, Dec 22 (Reuters) - Shares in German chipmaker Infineon (IFXGn.DE) and its ailing Qimonda QI.N unit soared on Monday after Qimonda secured a 325 million euro ($453.6 million) lifeline loan and the option to tap German federal aid. Shares in Infineon were up 11.4 percent at 0918 GMT and Qimonda shares (QI1Ay.F) gained 83.6 percent in Frankfurt floor trading, while the broader German market .GDAXI was down 2.3 percent.
"The ... government's willingness to support Qimonda in our view has a positive read-across for Infineon, which employs more workers in Germany and is a key supplier to the German auto & industrial sectors," Deutsche Bank analysts wrote in a note.
They upgraded Infineon to "hold" from "sell" and raised their target price in the company to 0.70 euros from 0.60.
The German state of Saxony, where memory chipmaker Qimonda operates a plant, and Infineon agreed on Sunday on a rescue package supported by an unnamed investment bank in Portugal, where Qimonda has its second European plant.
Saxony will put up 150 million euros, Infineon will contribute 75 million euros and the Portuguese bank 100 million euros of the loan, Saxony's Economy Ministry said.
Qimonda will also have the option to draw on a further 280 million euros state guarantee from the federal government and Saxony. [nLL380236]
"It is painful for Infineon to make available that amount of cash," LBBW analysts wrote in a note. "However, we think the attempt to grant Qimonda an extended grace period does make sense."
Qimonda employs around 3,200 at its plant in Saxony's capital, Dresden, and another 1,800 in Portugal.
Qimonda warned this month that it could face a cash crunch by the end of the first quarter of 2009 if it did not find an investor, and delayed its earnings report originally scheduled for Dec 1.
Like its competitors Elpida (6665.T), Micron (MU.N) and Samsung (005930.KS), Qimonda is struggling with a slump in prices for dynamic random access memory (DRAM) chips -- used mainly in PCs -- and has tried to compensate with cost-cutting measures and job cuts.
Infineon, which spun off its former unit in 2006 and listed it on the New York Stock Exchange in the hope of cutting its exposure to the volatile memory chip market, has been trying to find a buyer for most of the 77 percent of Qimonda it owns.
(Reporting by Christoph Steitz; editing by John Stonestreet)
((christoph.steitz@thomsonreuters.com; +49 69 7565 1269; Reuters Messaging: christoph.steitz.reuters.com@reuters.net))
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