Infineon Chip Delays Could Benefit Texas Instruments

5/19 - Citi's Glen Yeung is upgrading Texas Instruments (TXN) to Buy from Hold, reversing an earlier downgrade. Yeung has also boosted TXN's target price to $39 from $31. FQ208 and FY08 estimates go to $0.46 and $1.99 from $0.45 and $1.56 respectively. Yeung is upbeat about TXN's performance in handsets:

'Our field checks suggest that rolling forecasts from TI's largest handset customer point to a significant increase in chip orders in 2H08 versus 1H08, driven by new product launch and depleted inventories...Meanwhile, our checks also indicate that TI is holding onto Nokia share better than anticipated. We note that 1) share loss at low-end has been pushed out, 2) EDGE share loss has also been delayed, 3) TI has opportunity to win analog at Nokia.'

"Finally, Yeung sees a big opportunity for upside given TXN's historically low valuation..."

5/6 - "Infineon (IFX) reported a weak second quarter of 2008, as the combined pressures of write-down of carrying value of Qimonda's assets, strong Euro and weaker demand continued to hinder revenues and operating margins. We were disappointed by the poor show by the AIM division, which remained flat sequentially as well as year over year...These results, as well as the treatment of Qimonda as a discontinued operation, have led us to lower our revenue and earnings expectations for the remainder of 2008 and 2009."

"We continue to rate shares of IFX a Hold, with our target price of $10.20. Currency headwinds and cyclical risks posed by AIM, with heavy exposure to US, would overshadow the positive developments of communications business...We believe shares of Infineon should sell at 1.08x our 2008 sales estimate, as the company works to improve its profitability in all its divisions, and our target price is $10.20 over the next six months."

5/28 - "Infineon's CEO Wolfgang Ziebart recently departed the company. This has given new energy to consolidation speculations. I think it is not without reason.

Ziebart, it is said, was a proponent of small acquisitions and organic growth. His exit seems to have come after internal management disagreements. With Ziebart gone, the doors are now open for larger mergers directed towards consolidation along the lines of the recent STM-NXP JV. One of the possibilities being floated around is a merger with NXP. Another possibility is a wireless JV with Freescale. Also, these possibilities are not mutually exclusively either."

"...the political and legal environment in Europe makes the NXP merger a real possibility as well. I repeat, European semiconductor manufacturers and the value chain are consolidating, and Infineon will be an active part of the big picture. So, don't be surprised if you see more mergers later this year."