In­fi­neon Tech­nolo­gies Chief Bauer leads Ger­man chip­maker to profit

The Pak Banker - - Company& -

FRANK­FURT: In­fi­neon Tech­nolo­gies AG's Chief Ex­ec­u­tive Of­fi­cer Peter Bauer says a fo­cus on tai­lor-made chips for cars and ma­chin­ery is help­ing Europe's sec­ond­largest semi­con­duc­tor maker over­come the in­dus­try's sharp price and de­mand swings.

"Our risk pro­file is much lower" af­ter get­ting rid of high-vol­ume, com­modi­tized chips used in per­sonal com­put­ers and mo­bile phones, Bauer said in an in­ter­view last week at the com­pany's head­quar­ters in Neu­biberg, south of Mu­nich. "The com­pany has some dif­fi­cult times be­hind it. Now we are cycli­cal, but not volatile."

In 2004, Bauer as­sumed board re­spon­si­bil­ity for In­fi­neon's au­to­mo­tive, in­dus­trial and mul­ti­mar­ket units-six years later, those are the only busi­nesses left and Bauer is CEO. And In­fi­neon, the worstper­form­ing com­pany in Ger­many's bench­mark DAX In­dex be­fore he took over, can show off ris­ing prof­its, the first div­i­dend in more than a decade and an 85 per­cent share price gain this year. STMi­cro­elec­tron­ics NV, Europe's largest chip­maker, has risen 20 per­cent in 2010.

"Bauer picked the right mar­kets where price is not ev­ery­thing and long-term cus­tomer re­la­tion­ships are im­por­tant be­cause the chips are ap­pli­ca­tion-spe­cific," said Boris Boehm, who helps man­age 1 bil­lion eu­ros ($1.34 bil­lion) at Aramea As­set Man­age­ment in Ham­burg, in­clud­ing In­fi­neon shares. "The com­pany is now in a sur­pris­ingly good state, con­sid­er­ing that it posted mas­sive losses for such a long pe­riod of time."

In­fi­neon ac­cu­mu­lated losses of 4.7 bil­lion eu­ros af­ter it was sold by Siemens AG, Europe's largest en­gi­neer­ing com­pany, in an ini­tial pub­lic of­fer­ing in March 2000. In­fi­neon's shares were sold for 35 eu­ros each, rose as high as 83.74 eu­ros in June 2000 and fell to an all-time low of 35 cents in March 2009. The stock dropped 0.3 per­cent to 7.186 eu­ros in Frank­furt yes­ter­day.

Bauer, 50, be­came CEO in June 2008 and com­pleted a re­vamp that started in 2006 with the carve-out of the un­prof­itable me­mory-chip unit Qi­monda and ended with the agree­ment in Au­gust to sell the mo­bile-chip di­vi­sion to In­tel Corp. Qi­monda filed for in­sol­vency in 2009.

Other chip­mak­ers also re­treated from the me­mory mar­ket to avoid deal­ing with un­even sales of per­sonal com­puter semi­con­duc­tors that hurt earn­ings when sup­ply out­weighed de­mand. In­tel ex­ited the me­mory-chip in­dus­try more than 20 years ago and Texas In­stru­ments Inc. sold its busi­ness in 1998.

Af­ter post­ing a net in­come of 390 mil­lion eu­ros in the fourth quar­ter of fis­cal 2010, Bauer has five con­sec­u­tive quar­ters of prof­its be­hind himthe long­est streak since the IPO. His pre­de­ces­sor Wolf­gang Ziebart presided over 13 quar­ters of losses and three of profit, ac­cord­ing to Bloomberg data.

Bauer fore­cast a 10 per­cent im­prove­ment in sales as well as stronger mar­gins in fis­cal 2011 and said last month that In­fi­neon plans a div­i­dend of 10 cents for the past fis­cal year, the first pay­out in a decade. The sales tar­get for the cur­rent fis­cal year may be "con­ser­va­tive" as the com­pany is awash with or­ders, the CEO said. Bauer, whose first job was as a judo trainer, com­pleted his en­gi­neer­ing de­gree at Tech­ni­cal Uni­ver­sity in Mu­nich in 1986 and started at Siemens as devel­op­ment en­gi­neer of mi­cro­con­trollers, even­tu­ally be­com­ing vice pres­i­dent of that unit. In­fi­neon's re­main­ing busi­nesses have "been hid­den be­hind the turn­around story of wire­less, and be­fore that it was about me­mory, me­mory, me­mory," Bauer said. As in­vestors learn more about the com­plex in­dus­trial busi­ness, "they be­come in­creas­ingly happy with what they see there." -Bloomberg

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