Infineon board backs a break-up of company

17th November 2005, Comments 0 comments

17 November 2005, MUNICH - The supervisory board of Infineon approved Thursday plans for a break-up of the troubled German DAX-30 semiconductor company, with a new unit specializing in dynamic random access memory (DRAM) to be formed in the middle of next year.

17 November 2005

MUNICH - The supervisory board of Infineon approved Thursday plans for a break-up of the troubled German DAX-30 semiconductor company, with a new unit specializing in dynamic random access memory (DRAM) to be formed in the middle of next year.

The memory-chip division of Europe's biggest semiconductor manufacturing group will be hived off through a public offering of shares, leaving Infineon as a manufacturer of logic chips only.

Infineon supplies logic chips to the automotive, telephone and other industries.

Infineon itself is the fruit of a split: it was originally a division of German engineering group Siemens.

Currently the DRAM business provides 40 per cent of Infineon's revenues, but the sector is highly volatile. Infineon has blamed the DRAM business for its continued losses, saying the rest of the company's business will be offering steadier profits.

Chief executive Wolfgang Ziebart said the DRAM division would keep its operational headquarters in Germany and be a world-rank company with major growth potential. Kin Wah Loh, who currently is its divisional head, would be the new business's chief executive.

The legal split will take place by July 1 next year and a flotation after that would be the "preferred option".

"The plan is to invest the proceeds of a probable flotation in an expansion of the logic-chip business," Infineon said.

Labour groups have been hostile to the split, arguing there are synergies between the two businesses, but Ziebart said both the technological processes and the business models of the two had diverged.

The response on financial markets was mixed. On the Frankfurt stock exchange, Infineon shares initially rose 1.7 per cent to 8.30 euros, but then settled to 8.00 euros, a decline since Wednesday of 1.7 per cent.

Theo Kitz, an analyst at bank Merck-Finck, said however that the split was good news. He said it might be best for Infineon to first seek a strategic partner for the business and then offer it for sale later.

DPA

Subject: German news

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