Qimonda raises $546M in reduced IPO

August 10, 2006 – Investors greeted the trading launch of Infineon’s former memory chip unit, Qimonda, with lukewarm interest, pushing shares up about 4% on its first day of trading to $13.54. The IPO, which had been cut down from initial pricing of $16-$18/share to just $13/share, raised an estimated $546 million, less than half of the ~$1.1-$1.3 billion Infineon had initially sought. Infineon also reduced the number of American depositary shares to 42 million from 63 million, to help spur demand for investing in Qimonda, the No. 2 worldwide DRAM memory maker.

In a statement, Qimonda president and CEO Kin Wah Loh applauded “strong participation” from many US institutional investors, but acknowledged the need to adjust expectations in a challenging market environment — nearly half of all planned IPOs in the past month have been withdrawn.

The reduced price of $13/share values Qimonda at around $3.5 billion, just under its projected total sales for the current fiscal year — a level far cheaper than its rivals, noted a Reuters report. Proceeds from the IPO probably will be only around $82 million, and Infineon still maintains a 86%-88% stake in the firm, more than the 79% it had planned after the IPO, noted financial analyst firm Commerzbank Corporate Markets, quoted by MarketWatch. “Infineon has made only a small step to get rid of its memory chip business. We believe that it might take at least one-and-a-half years to reach a minority,” stated the firm.

Others feel the spinoff of the memory unit was necessary, and a success despite the disappointing numbers. “Management has done well to go through with it, rather than pull it,” noted Dredner Kleinwort, also quoted by Marketwatch, noting that the money raised isn’t that much to either company, and the low listing gives a vehicle to raise or sell more.

For the first six months that ended in March, Qimonda posted a net loss of 136 million euros (about US $174 million), vs. a profit of 122 million euros ($157 million) in 1H05.


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