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Infineon Technologies strong results overshadowed by Qimonda legal dispute

The Munich-based chipmaker posted impressive quarterly results that were overshadowed by the company having to increase provisions to cover the cost to settle legal dispute involving a memory chip unit Qimonda.

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Infineon Technologies
Source: Bloomberg

Infineon Technologies (ETR:IFX) has had a successful year with the company hitting its revenue targets, with further dividend increases planned.

But the German chipmaker’s ongoing legal dispute over Qimonda, a former memory chip unit that went into administration in 2009, still hangs over its head and dampened what has been a strong financial year for the company.

Qimonda casts shadow over results

In its fourth quarter (Q4), the company increased provisions by €159 million to ensure that it has adequate funds set aside to cover a possible out of court settlement for the insolvent unit.

Administrators submitted a filing back in December 2010 to the Munich District Court asserting that Infineon failed to make declarations to the registrar as it moved assets in the process of setting up Qimonda as a subsidiary, which impacted its valuation in the chipmaker’s favour.

Administrators have sued the chipmaker for around €3.4 billion, with the company setting aside provisions of €305 million back in 2012.

On-going concerns about legal dispute saw the company’s share price fall by 5.6%, despite it’s the business recording a strong set of quarterly results. Infineon’s share price hit a record high of €25.49 a share in mid-June, only to see it fall to €16.24 on 24 October – its lowest level for the year. Infineon’s stock opened at €19 on Monday.

Infineon’s upbeat outlook

In Q4, the company saw its revenues grow by 5% quarter-on-quarter from €1.9 billion to €2 billion, which the chipmaker attributed to a ‘healthy demand and somewhat stronger US dollar’.

The company expects 2019 to be another strong year for the business but admits that it is concerned about the political and economic headwinds on the horizon that may pose a challenge to growth in the next fiscal year.

‘The fourth quarter was a strong finish to an outstanding fiscal year,’ CEO of Infineon Reinhard Ploss said in a statement. ‘For the first time, our current business segments have generated over [€2 billion] of revenue in one single quarter.’

‘The digitisation and electrification of many aspects in our daily life are resulting in sustained high demand for our products and solutions,’ he said. ‘We begin the 2019 fiscal year with well-filled order books and aim to continue growing faster than the market as a whole.’

‘We are keeping a vigilant eye on political and economic developments and will react appropriately if and when the need arises,’ he added.

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