http://www.amtddj.inlumen.com/bin/djstory?StoryId=CqUw1qaebqLqWmdm2otu=DJ THE SKEPTIC: Infineon Lacks Visibility 07/26/2005Dow Jones News Services(Copyright © 2005 Dow Jones & Company, Inc.) By Brian Truscott A DOW JONES NEWSWIRES COLUMN LONDON (Dow Jones)--Infineon's (IFX) unsettling third-quarter results Tuesday suggest a genuinely soft landing for the European chipmaker is now in question.The German company's shares - up a speculative 20% in recent weeks - slid almost 3% on news that pricing pressure and higher-than-expected charges meant a hefty EUR240 million net loss in the third quarter.The company tried to spin a tale of improved earnings going forward, but it's hard to ignore an outlook clouded by restructuring charges, euro strength and those price problems.So while Infineon's revenues paint a relatively happy picture, profits remain a concern. Yes, Samsung and Hynix - two of the world's top memory-chip makers - have also seen earnings hit by similar effects, but the two rivals managed to stay in the black.What's more, Infineon's fortunes compare poorly with some U.S. counterparts. Take Texas Instruments, a chipmaker that relies more on cellphones than on Infineon's bread-and-butter automotive and industrial sectors. TI posted a 42% increase in profits this week, thanks in part to efficient inventory management.Infineon fared poorly on the valuation front, as well. Its price-to-book ratio, considered a bellwether for the industry, generally lags U.S. rivals. No surprise why price-to-book models are preferred: earnings in the sector are notoriously volatile so price/earning multiples are largely ignored.Nevertheless, markets have tended to give more credence to managers at U.S. chipmakers, even Micron, which has also been suffering on the earnings front of late, because of an ability to work more quickly, effectively and transparently.Infineon's corporate governance credentials tend to be discounted. Partly this stems from a close reliance on all things Siemens, and its strategy. But another concern has to be the recent airing of dirty laundry at Infineon, which revolves around motor racing sponsorships and alleged payouts to Infineon executives. ....CheersCor
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