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UPDATE 2-Infineon gloomy on near term after Q3 beat
July 31, 2012 / 6:21 AM / 5 years ago

UPDATE 2-Infineon gloomy on near term after Q3 beat

* Imposes hiring freeze, slashes investment

* 2012 revenue expected to drop 3 pct

* Q3 revenue flat vs slightly lower predicted

* Q3 oper. margin 12.7 pct vs guidance of around 12 pct

* Shares jump 7.8 pct, outperforming main index

By Harro Ten Wolde

FRANKFURT, July 31 (Reuters) - German chipmaker Infineon on Tuesday painted a gloomy picture of the near future after an unexpected beat on third-quarter revenue and operating margin hoisted its shares over 7 percent.

The group, which supplies the car and engineering industries, imposed an immediate hiring freeze and slashed investment for 2013 in anticipation of sharply lower sales in the near term, echoing the wariness of peers STMicroelctronics and Intel.

“Growth and margin are currently below plan, reflecting global uncertainties,” said Infineon’s Chief Executive Peter Bauer, who will leave in September for health reasons.

He added he expected 2012 revenue to drop about 3 percent, while operating margin would be at 13-14 percent.

“Current and near-term foreseeable sales revenue levels are significantly lower than originally forecast,” he said.

The company confounded its own low-key third-quarter outlook, which it lowered only last month, by posting flat revenue where it had predicted a slight decline and an operating margin of 12.7 percent, ahead of the predicted 12 percent.

Shares in Infineon, whose customers include Korean carmaker Hyundai, software maker Microsoft and the U.S. Government Printing Office, were up 7.8 percent at 5.98 euros by 1003 GMT at the top of a 0.3 percent stronger sector index.

Infineon shares dropped to nine-month lows after a June 26 profit warning and are now up 1 percent so far this year, underperforming the sector, which has risen almost 10 percent.

“Infineon effectively guided down the Street in a warning and then handsomely outperformed,” said Jefferies analyst Lee Simpson.

He said guidance was probably conservative and said the company was right to cut investment.

Third-quarter operating profit before exceptionals, or “total segment result”, for the March-to-June period fell 13 percent to 126 million euros ($154.25 million).

Infineon said it expected sales in the fiscal fourth quarter to the end of September to be flat or down slightly from the third quarter while operating margin would fall back to 12 percent.

It previously said fourth-quarter revenue and margin would remain flat.

Analysts expect revenue for the fiscal year, which ends on Sept. 30, of 3.87 billion euros according to StarMine, or a 3.2 percent drop from last year’s 4.00 billion.

The stock trades at a 12-month forward price-to-earnings ratio of 13.3, compared to 24.4 for STMicroelectronics and 10.5 for Intel, according to StarMine data.

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