Leading semiconductor and complete systems solutions provider, Infineon Technologies AG’s (IFNNY) first-quarter fiscal 2015 earnings rocketed 50% year over year to €0.12 (15 cents).
The company witnessed robust performance across all its segments, which drove earnings in the quarter. Infineon has been making concerted efforts to tap the immense market potential, which has prompted consistently strong results for the company in the last seven quarters.
Inside the Headlines
In the quarter, revenues increased 15% year over year to €1,128 million ($1,409 million). The company reported segment results of €169 million ($211 million) for the quarter, an increase of 46% year over year; whereas the segment result margin increased 320 basis points year over year to 15%.
Automotive (ATV) segment revenues increased 15% year over year to €518 million ($647 million) in the quarter. In the reported quarter, Industrial Power Control (IPC) segment revenues increased 6% year over year to €190 million ($237 million). Power Management and Multimarket (PMM) segment revenues amounted to €280 million ($350 million) in the quarter, marking a year-over-year increase of 18%. Revenues in the Chip Card and Security (CSS) segment totaled €132 million ($165 million), reflecting a year-over-year increase of 22%.
Global demand remained strong for German vehicles and cellular network infrastructure applications products. However, demand for electrical industrial drives, traction, renewables and major home appliances; mobile devices products; and chips used in payment, mobile communication, authentication and pay TV applications were lower due to seasonal trend.
On Jan 13, 2015, Infineon finished the acquisition of International Rectifier Corp., a manufacturer of power management semiconductors, for $3 billion in an all cash deal.
Liquidity
Infineon’s cash and cash equivalents improved to €1,393 million ($1,740 million), up from €1,058 million as on Sep 30, 2014. The company had a long-term debt of €155 million ($194 million), higher than €151 million as on Sep 30, 2014.
Also, shareholders equity came in at €4,387 million ($9,866 million), up from €4,154 million at the end of Sep 2014. Net cash used in operating activities stood at €39 million ($88 million).
Guidance
For second-quarter fiscal 2015, total revenues are anticipated to grow between 5–9%, whereas the Segment Result Margin is expected to come within 12–13%. Infineon estimates fiscal 2015 revenues to increase by about 12% with a possible deviation of 2 percentage points, while it expects Segment Result Margin to be within 14% – 15%.
Both the outlooks are based on an assumed exchange rate of US$1.20 to the euro and excludes the effect of International Rectifier.
Our Take
Riding on the strong momentum, Infineon again came up with strong results thanks to the steady operational performance of the company. Also, the International Rectifier buyout completion promises strong growth prospects as its product line will serve as a perfect complement to Infineon’s existing power management business. The acquisition will also help Infineon to expand in important international markets, particularly North America and Asia.
Infineon currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the Electronic-Components-Semiconductor industry include United Microelectronics Corporation (UMC), Ambarella, Inc. (AMBA) and Avago Technologies Ltd. (AVGO). All three stocks sport a Zacks Rank #1(Strong Buy).
Note: 1 EUR = $1.2489 (period average from Oct 1, 2014 to Dec 31, 2014)
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