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Friday, July 21, 2006

Can the Qimonda IPO Spin-Off Help Infineon

Stock Tickers: IFX, QI

Infineon AG (IFX) posted poor results overseas as it said the company lost 23 million Euros. Shares of IFX were trading down 5% overseas on this news. Its unit Qimonda failed to offset losses at its communications chips business.

There is a backdoor play here, although it has been known that we may see the terms for the IPO by today. Qimonda is the memory chip unit that Infineon plans to spin off, and that is just what the company announced it would do today (as expected). Qimonda filed to sell 63 million ADS shares on the NYSE, with the proceeds of 21 million shares going to IFX and the other 42 million shares being sold by Qimonda itself. The ticker "QI" has been designated for Qimonda. The price range has been put in the $16 to $18 range, and the proceeds are designated to finance investments in manufacturing and in R&D.

Credit Suisse, Citigroup and JPMorgan will act as joint book-running managers for the offering. Co-lead managers of the transaction are ABN Amro Rothschild, Deutsche Bank Securities and Hypovereinsbank. Assuming completion of the offering and a full exercise of the over-allotment option, Qimonda's free float will be approximately 21 percent; and that will translate to approximately a $5 Billion market cap.

Oddly enough, Infineon's stated market cap is now only $8.3 Billion, and that is before this 5% haircut in its shares.

Jon C. Ogg
July 21, 2006

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