March 10, 2000
Infineon's IPO Expected To Soar
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A.P. INDEXES: TOP STORIES | NEWS | SPORTS | BUSINESS | TECHNOLOGY | ENTERTAINMENT
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Filed at 2:27 p.m. EST
By The Associated Press
FRANKFURT, Germany (AP) -- Shares in Infineon Technologies AG, the semiconductor branch of electronics giant Siemens AG, are expected to explode in value when they hit the market Monday in Germany's biggest public offering since Deutsche Telekom went on the block in 1996.
The sale, coming as Siemens' former loss-making subsidiary is staging an impressive comeback, could boost Siemens' coffers with billions of dollars, bolstering it with funds for further investment.
The German electronics company plans to float 29 percent of Infineon, issuing up to 173 million shares between $28 and $34 apiece. At the high end, the sale is expected to raise $5.8 billion.
Priced well below lofty technology stocks already on the market, investors considered the issue a bargain and oversubscribed. Monday's opening price will be officially set on Sunday.
``I had no idea the interest would be so enormous, and probably the company didn't either, otherwise it would have raised the price,' said Hannah Cunliffe, a fund manager with Union Investment in Frankfurt.
Some analysts believe Infineon shares could triple during their initial trading, but Cunliffe's expectations were a bit more tempered.
``First day trading is always guess work,' she said. ``It should double by the end of the year, but if it doubles or triples in the first day, we'll have to wait to see how long it stays at the price,'
Deutsche Telekom's raised $11.33 billion from its initial offering of 600 million shares, though its stock rose just 2 percent on its opening day.
Infineon is rebounding from a grim 1998, when it chalked up losses to the tune of 1.2 billion marks ($588 million), due mainly to plummeting demand and withering prices. The red figures persuaded Siemens to spin off the loss-making unit.
But the branch has since gone back in the black, helping Siemens double its profits in 1999 from the year before. The recovery was in part due to resurgent demand which lifted the entire chip industry, including Infineon's competitors Hyundai Electronics, U.S.-based Atmel and France-based STMicroelectronics, Europe's second biggest chip maker after Philips.
``It was in dire straits in '98, but Siemens has really invested a lot in it just because of that reason,' said Cunliffe. ``If you talk to people who buy chips, the name Infineon comes up much more often now that it did just a year ago. It's going to be a big company.'
She said the company could take a leading role in the nascent market for electronic money and identification cards, known as smart cards, but warned that it still lags behind in mobile communications chips, which is a rapidly expanding sector.
In October, Siemens went public with its first spinoff, electronic component maker Escos AG. That sale raised about $945 million.
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On the Net: Infineon's site at infineon.com
Siemens' site at siemens.com
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