Infineon Technologies AG, Europe's second-biggest chipmaker, may need more cash in the next two quarters if chip prices don't rebound, even after selling 1.5 billion euros (US$1.38 billion) of shares two months ago, Deutsche Bank AG analysts said. The shares fell as much as 14 percent.
"We now believe the company may need refinancing in the next one to two quarters, most probably at terms detrimental to existing shareholders," Deutsche Bank said. "Investors are advised to focus on semiconductor stocks with low valuations and solid balance sheets, the latter not being true for Infineon."
Infineon's stock fell 2 euros to 12.35, a record. Chief Executive Ulrich Schumacher in July sold 60 million shares at 25 euros apiece, at the time saying the capital increase would give him enough "flexibility" for the next 12 months. Things have gotten worse since then, analysts and investors say.
"The cash-burn rate at Infineon is very high," said Frank Joachim, a technology fund manager at HSBC Trinkaus Capital, which manages about 10 billion euros. "The prices for DRAM aren't recovering, rather they continue to fall further." Demand for memory chips has plunged as consumers buy less computers and mobile phones. Last week, Schumacher told Germany's Manager Magazine, the "situation has never been worse."
Spot prices for Infineon's main dynamic random access memory chips have fallen to US$1.59 each, while it costs the company about US$3.40 to produce the chips.
Deutsche Bank also lowered its target price for the German company to 15 euros, without giving its previous forecast. The bank, which helped manage Infineon's initial public offering last year, did not change its "buy" rating on the stock.
Siemens AG, Germany's biggest maker of consumer electronics, sold shares in Infineon for 35 euros last year. Siemens, which still holds 51 percent of the chipmaker, declined to comment.
"We have a solid finance basis for the next months," said Infineon spokesman Ralph Heinrich. Heinrich pointed to the July share sale as well as the divestments of Infineon's stake in Siemens joint-venture Osram Opto and its infrared unit for more than US$620 million in the fourth quarter.
Schumacher told Manager Magazine selling a convertible bond or the use of standing credit lines would be possible options if Infineon needs more money. Infineon has also said it may ask Siemens to give back part of the 280 million euros in dividends it paid its parent company for the last fiscal year.
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