Infineon Technologies AG, a semiconductor-making unit of Siemens AG hurt by falling prices for its products, registered with the US Securities and Exchange Commission (SEC) to raise money by selling shares.
Infineon said it hired Goldman Sachs Group Inc to manage the sale, which will enable the Munich, Germany-based company "to raise cash for future investments, potential acquisitions or the repayment of short-term debt," said spokeswoman Katja Schlendorf.
The company is moving ahead while rivals STMicroelectronics NV and Royal Philips Electronics NV are reducing investments in the face of falling demand. Chipmakers worldwide are facing an expected 14 percent decline in sales this year from makers of personal computers and cellular phones because consumers are putting off purchases in a slowing economy.
"They simply need cash," said Karsten Iltgen, an analyst at WestLB Panmure in Dusseldorf. Falling prices have meant it costs Infineon more to make memory chips than it can get by selling them, said Iltgen.
Shares of Infineon, which were sold at 35 euros when the company was spun off from Siemens last March, rose 0.3 percent to 40.30 euros. That's down 57 percent from a June 2000 intra-day high of 93.50 euros.
Infineon, which filed with the SEC yesterday, hasn't made a decision about the size or timing of the sale, said Schlendorf.
The share sale is planned on the New York Stock Exchange, said Iltgen, where the company already lists American depositary receipts.
The company also hasn't ruled out selling shares globally, rather than just in the US. "This does not necessarily exclude a share sale in Frankfurt," said Schlendorf.
German companies can increase their capital by as much as 10 percent by selling shares to new investors, so the Infineon offering may be as big as 2.5 billion euros based on the company's 25.2 billion euro market value.
Infineon is struggling to counter falling prices for memory chips. Last month, the company told analysts that increasing price pressure and rising customer inventories are crimping margins.
"Their difficult earnings situation suggested for quite some time that they would need a capital increase," said Bernd Laux, an analyst at CAI Chevreux in Frankfurt. "This is a preparatory step so that they can go ahead as soon as market conditions seem favorable." Prices of DRAM have been slashed in recent months. They fell to US$1.36 yesterday after reaching US$8.96 in July last year.
In April, Infineon cut its target for spending on equipment and manufacturing plants to US$2.3 billion in fiscal 2001, which ends in September, from US$2.8 billion previously.
Last week, STMicroelectronics, Europe's biggest chipmaker and Philips, No. 3 in Europe, said they were also reducing capital expenditure to better cope with a continued slump in demand.
ST will reduce equipment spending for the second time this year to US$1.5 billion, from the US$1.9 billion it previously forecast. Philips will cut equipment spending this year to about 1.1 billion euros from the 1.3 billion euros forecast in April.
Global semiconductor sales are expected to fall to US$176.8 billion, from US$204 billion in 2000, said the World Semiconductor Trade Statistics group last week. The industry research group, whose members include about 90 percent of all chipmakers, had predicted last year a 20 percent rise in 2001 sales.
In order to reduce the impact of the volatile semiconductor market on its earnings, Siemens has said it wanted to cut its 54 percent stake in Infineon. It will dilute its holding by not participating in any upcoming share sale, said Siemens spokeswoman Sabine Metzner.
"Our intentions haven't changed," said Metzner. "We still want to reduce our shares of Infineon." Siemens shares rose 1.93 euros, or 2.3 percent, to 85.38 euros.
The filing "has not yet become effective," said Infineon in a statement on the Frankfurt stock exchange newswire.
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