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Contributors: Douglas McIntyre Jon C. Ogg

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Wednesday, August 09, 2006

Qimonda: Potentially The Second Worst IPO of the Year?

We have noted caution on the spin-off IPO of Qimonda (QI) from Germany's Infineon (IFX). This morning we now know just how ugly this IPO. It is now only 42 million shares that priced at $13.00.

The problem is that this was supposed to be 63 million shares at a range of $16 to $18 per share. Yesterday we noted that the share count was being reduced and that the per share range was being taken down to either a $14 to $15 range or a $13 to $14 range per share.

It really looks like no one wants another money-losing DRAM company. Trying to be a new DRAM company on a standalone basis and trying to fight it out with Micron and others must be like trying to create a new Frankenstein from a bunch of dead squirrels. That is what the street is telling the company anyway.

These guys should read blogs and news reports before they dis this IPO. The answers are usually obvious if you look at a situation, but that doesn't mean that they want to hear what the correct answer is.

Various reports show operating margins are squat, and that is probably because a new standalone DRAM company has no competitive advantage. DRAM is essentially a commodity now, although prices seem to only come down through time.

Do we dare compare this to a certain VoIP IPO? That may be a bit harsh, but Infineon obviously didn't read the tea leaves here. Maybe it's a translation thing from German to English. Or maybe it is just sticking your head in the ground hoping the woes of the world won't affect you.

Infineon is going to hold over 85% of the company after the IPO, so guess what investors get to look forward to if there is any sudden share price improvement. You got it! Further dilutions.......

Dear Infineon:

Dieser BĂ–RSENGANG stinkt!

Jon C. Ogg
August 9, 2006

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