Infineon Shares Rise on Report of Talks to Sell Mobile-Chip Unit to Intel
By Ragnhild Kjetland - Jul 9, 2010
Infineon Technologies AG rose as much as 2.6 percent in Frankfurt trading after Die Welt reported that the German semiconductor maker is close to selling its mobile- chip unit to Intel Corp. for as much as $1.4 billion.
The two sides have met several times in the past few weeks, though a contract has not yet been signed, the German newspaper said, without saying where it got the information. Infineon spokesman Kay Laudien and Intel spokesman Martin Strobel both declined to comment when contacted by Bloomberg.
Infineon’s wireless solutions business had 917 million euros ($1.13 billion) in sales in the 12 months ended Sept. 30, or about 30 percent of the Neubiberg, Germany-based company’s total revenue. Mobile-phone chip-manufacturing capacity is becoming more important as devices such as Apple Inc.’s iPhone drive demand for the specialized components.
“Intel is trying to build a strong strategy in the mobile market and willing to invest massively in this landscape, and a Infineon acquisition could be just another step towards that end,” Malik Kamal-Saadi, principal analyst at Informa Telecoms and Media in London, said via phone today. “However, Intel would face some technical and strategic issues while integrating Infineon wireless with its mobile media processor portfolio.”
Infineon is weighing options for its mobile-chip unit that could include a sale, two people familiar with the matter said June 15. The chipmaker hired JPMorgan Chase & Co. and opened a room for potential buyers to review its books, according to one of the people, who declined to be identified because the situation is private.
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“It will be crucial to see how management reinvests the proceeds” if Infineon sells the mobile-phone unit, said Bernd Laux, head of German equity research at Credit Agricole Cheuvreux in Frankfurt. Infineon should use the possible proceeds for acquisitions to bolster its industrial unit, he said.
Infineon jumped as much as 13 cents to 5.14 euros and traded at 5.05 euros as of 12:00 p.m. Before today, the stock had risen 29 percent this year.
In the first six months of the current fiscal year, the wireless unit’s sales rose 34 percent to 537 million euros. The unit also returned to an operating profit of 26 million euros from a loss of 73 million euros in the same period last year.
Customers of Infineon’s mobile-chip unit, which also makes radio-frequency and power management chips and transceivers for satellite radio, include Apple Inc. Ericsson AB, LG Electronics Inc. and Samsung Electronics Co.
“The whole mobile chipset business is getting increasingly commoditized, so the industry will definitely consolidate,” Informa’s Malik Kamal-Saadi said. “It doesn’t really make sense to have 10 to 15 players in this market landscape. The coming years will definitely reveal more mergers and acquisitions to leave the mobile chipset market with only 3 to 4 key players.”
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