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Falling stocks hamper tech cos' recovery

Posted: 26 Feb 2009     Print Version  Bookmark and Share

Keywords:economic recession  R&D  semiconductor companies  electronics companies 

Infineon is in a particularly disturbing condition. The German IC vendor is grappling with problems at its bankrupt memory semiconductor business Qimonda AG and simultaneously trying to stem losses at its own operation.

The company's American Depository shares, or ADS, tumbled on Monday to 65 cents, a whopping 94 per cent fall from the 52-week high of Rs.550.89 ($11.08).

At its peak in 2001, Infineon's ADS traded as high as Rs.4,387.72 ($88.25) but the trend has been downhill since and on Monday, the company's total market value fell to just under Rs.2,485.96 crore ($500 million), its worst closing level since it became a public company.

Infineon shareholders pilloried the company's management during its annual shareholders' meeting Feb. 12 and CEO Peter Bauer was forced to apologise repeatedly as he made a case for investors to support the company's request for more than Rs.2,485.96 crore ($500 million) in new capitalisation funds.

"I am speaking for a company that has been accompanied by a lot of negative press," Bauer told shareholders. "Billions in write-offs due to Qimonda, our share price that has fallen below one euro, compounded by a fairly dismal future outlook and all that overshadowed by Qimonda's insolvency proceedings. That's not news that's going to score a lot of points."

Many other chip manufacturers have recorded equally woeful performance on the equity markets reflecting investor worries that the industry may not recover and begin growing again for another 12 to 24 months.

Shares in Cypress, for example, are down more than 80 per cent this year and the company's market value has fallen to about Rs.3,331.19 crore ($670 million). It was once as high as Rs.28,837.13 crore ($5.8 billion).

Also on Monday, STMicroelectronics NV's stock price dove to a new 52-week low of Rs.219.26 ($4.41), down 68 per cent from the 12-month high of Rs.683.14 ($13.74). The Geneva, Switzerland-based company has lost more than 80 per cent of its market value in the last five years.

OEMs are not immune to the market downturn. In this group, companies with a heavy exposure to software and consulting like IBM Corp. and Oracle Corp. and data networking equipment maker Cisco Systems Inc., have fared better than rivals focused on the more price sensitive PC and wireless communication hardware business.

Over the last 12 months, shares in IBM and Cisco have fallen 36 per cent and 48 per cent, respectively, while companies like Dell, Motorola and Nokia have lost up to 70 per cent in market valuation.

- Bolaji Ojo
EE Times

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