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Infineon Technologies AG(IFNNY - Analyst Report) reported third quarter fiscal 2013 earnings of €0.07 (9 cents), whichmissed the Zacks Consensus Estimate of 10 cents per ADS. Quarterly earnings also declined 12.5% year over year.

Revenues

Infineon’s revenues in the quarter were €1.02 billion ($1.3 billion), up 3% year over year and 11% sequentially. Revenues were below the Zacks Consensus Estimates of $1.3 billion.

Revenues by Segments

Automotive segmentrevenues improved 7% to €459 million ($599 million) in the third quarter of 2013 from €428 million in the prior-year quarter. On sequential basis, revenues were up 8%. The increase was mainly attributable to the ongoing rise in vehicle production and sales in North America and Asia.

In the reported quarter, Industrial Power Control segment revenues were down 2% year over year to €173 million ($226 million), while it was up 20% on sequential basis. During the third quarter, IGBT module business generated higher revenues as demand increased in all applications. In addition, business with power semiconductors deployed in the field of renewable energy was upbeat, especially in China.

Power Management and Multimarketsegment revenues reported a 14% year-over-year increase to €266 million ($347 million) in the third quarter. Sequentially revenues were up 17%. The sequential increase was driven partly by high demand for server and power supply related products. In addition, deliveries to manufacturers of mobile devices such as smartphones and tablets continued to grow in volume.

Revenues in the Chip Card and Security totaled €119 million ($155 million), down 2% year over year, but up 10% sequentially. Rising demand for SIM cards, and Authentication and Trusted Platform Modules (TPM) helped the sequential improvement. Both Payment and Mobile Security businesses were strong, while demand for Government ID also performed well.

Operating income during the reported quarter declined to €94 million ($123 million) from €110 million in the prior-year quarter. The decline was primarily due to lower sales and gross profit compared with the prior-year quarter. Segment result declined 7% year over year, but increased 72% sequentially to €117 million ($153 million).

Balance Sheet and Cash Flow

Income from continuing operations in the third quarter was €87 million ($114 million), compared with €44 million recorded in the previous quarter and €103 million reported in the prior-year quarter. Free cash flow from continuing operations grew significantly by 85% sequentially to €135 million in the third quarter. The sequential improvement was attributable to sharp increase in the cash inflow from operating activities, driven by efficient working capital management.  On a year-over-year basis, free cash flow increased to €135 million from a negative €22 million.

Outlook

Concurrent with the earnings release, the company provided its guidance for the fourth quarter and fiscal 2013. Fourth quarter revenues are expected to come in at about €1.05 billion, with three of its four operating segments expected to contribute to revenue growth.

For fiscal 2013, management expects revenues to decline 1.5% year over year. Thus, the Segment Result Margin is expected to be below 10% for fiscal 2013.

Infineon currently has a Zacks Rank #3 (Hold). However, some other companies operating in the same industry which can be considered at the moment are Diodes Incorpoerated (DIOD - Snapshot Report), Rambus Inc. (RMBS - Snapshot Report) and Vitesse Semiconductor Corp. (VTSS - Snapshot Report) all having Zacks Rank #1 (Strong Buy). 

http://www.infineon.com/dgdl/INFXX201307-058e.pdf?folderId=db3a30433c8a9179013c8ee7701d5634&fileId=db3a304340155f3d01402dba931d2483

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