Infineon lower amid fears DRAM prices may hand back recent gains
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FRANKFURT, Mar 14, 2002 (AFX-UK via COMTEX) -- Shares in Infineon Technologies AG were lower in midmorning trade amid fears that DRAM prices may hand back some of their recent strong gains, dealers and analysts said.
At 10.48 am, Infineon was down 0.02 eur or 0.08 pct at 25.38, while the DAX 30 index was up 25.89 points or 0.47 pct at 5,270.83.
In a note to clients, UBS Warburg said it is evident that DRAM prices can fall or should at least stabilise in the near term.
UBS said that Asian group Asustek Computer Inc has indicated a weaker-than-expected 2002, predicting a 10-15 pct sequential decline in the PC market on the back of weaker-than-expected clone market.
PC makers had expected a large rise in sales based on fourth quarter sales figures and subsequently ordered a large amount of components. But now they do not expect such strong demand, UBS said.
Meanwhile, UBS said Infineon has reportedly said there has been double ordering in the recent ordering frenzy, which served to nudge prices higher. However, the broker said this may soon end, causing DRAM manufacturers to re-assess demand.
Meanwhile, UBS highlighted a more compelling valuation at Philips, which is trading at 1.1 times EV/IC (invested capital) on a normalised ROIC (return on invested capital) over a cycle of 6 pct. However, Infineon currently trades at 1.7 times EV/IC for a normalised ROIC over a cycle of 3 pct.
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