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Infineon Ends FY 2010 on High Note

Neubiberg, Germany –– {complink 2565|Infineon Technologies AG} today reported results for the fourth quarter of the 2010 fiscal year, ended September 30, 2010.

“The last quarters’ excellent performance has continued in the fourth quarter across all the segments. The company’s growth during this upcycle remains significantly ahead of the market and our profitability has risen yet again, as evidenced by more than 18 percent Segment Result margin and free cash flow of Euro 236 million from continuing operations”, says Peter Bauer, CEO of Infineon Technologies AG.

Review of the group financials of the fourth quarter of the 2010 fiscal year
Due to the planned divestiture of Infineon’s Wireless mobile phone business to Intel Corporation, announced on August 30, 2010, Infineon now reports this part of the business as a discontinued operation. On the other hand, our segment reporting for the 2010 fiscal year continues to include our Wireless Solutions segment. We have focused our comments herein on our continuing business and references to our segments exclude Wireless Solutions, unless otherwise stated.

Infineon’s revenues in the fourth quarter were Euro 942 million, up 6 percent compared to the third quarter and up 55 percent year-over-year. The sequential increase in revenues reflects growth in all of the company’s segments. Including the Wireless Solutions business, revenue totaled Euro 1,400 million.

Fourth quarter Total Segment Result was Euro 171 million, a significant increase of 24 percent compared to Euro 138 million in the prior quarter. Total Segment Result margin in the fourth quarter reached 18.2 percent, up from 15.6 percent in the third quarter. Including the Wireless Solutions business, Segment Result totaled Euro 274 million and Segment Result margin was 19.6 percent. This was well in-line with September guidance of 18 to 20 percent Segment Result margin.

For the fourth quarter, income from continuing operations was Euro 193 million, up from Euro 103 million in the third quarter. The sequential increase of 87 percent contained a non-recurring benefit of Euro 69 million resulting from deferred tax assets recorded during the fourth quarter. Infineon reported income from discontinued operations, net of income taxes, of Euro 197 million for the fourth quarter, up from Euro 23 million in the prior quarter. Net income from discontinued operations contained mainly the after-tax profit of the Wireless mobile phone business and also the recognition of a deferred tax asset in anticipation of the use of tax loss carry-forwards against the expected taxable gain from closing the divestiture of the Wireless mobile phone business.

Resulting net income for the group was Euro 390 million in the fourth quarter, a significant increase from net income of Euro 126 million in the preceeding quarter. For the fourth quarter, basic earnings per share were Euro 0.36 and diluted earnings per share were Euro 0.33, compared to Euro 0.12 and Euro 0.11, respectively, for basic and diluted EPS in the third quarter.

Besides the mobile phone business, the Wireless Solutions segment includes the analog and digital TV tuner and satellite radio receiver, as well as the radio frequency power transistors for amplifiers in cellular basestations.

Investments for continuing operations, which the company defines as the sum of purchases of property, plant and equipment, purchases of intangible assets and capitalized research & development (R&D) assets, were Euro 163 million in the fourth quarter, up from Euro 80 million in the prior quarter, reflecting further investments in the company’s production facilities. Depreciation and amortization within continuing operations was at Euro 85 million, compared to Euro 80 million in the prior quarter. Free cash flow from continuing operations for the fourth quarter was very strong at Euro 236 million, up significantly from Euro 173 million for the third quarter, despite the strong increase in capital spending.

The strong free cash flow generation drove increases in the company’s gross cash position to Euro 1,727 million and in its net cash position to Euro 1,331 million as of September 30, 2010. Both increased from Euro 1,514 million and Euro 1,108 million, for gross and net cash, respectively, as of June 30, 2010.

In recognition of the company’s favorable operating performance in the 2010 fiscal year and its comfortable cash position as of September 30, 2010, the Infineon management and supervisory board will submit for approval to the upcoming annual general meeting on February 17, 2011 a dividend per share of Euro 0.10 for the 2010 fiscal year.

Outlook for the first quarter and for the whole 2011 fiscal year
Infineon expects revenues for the first quarter of the 2011 fiscal year to be flat to down slightly compared to the fourth quarter of the 2010 fiscal year, depending on the foreign exchange rate environment and in particular on the development of the exchange rate of the US Dollar against the Euro.

Ahead of earlier guidance of flat to down slightly sequential revenues, fourth quarter sales in the ATV segment increased by two percent compared to the prior quarter to Euro 340 million. Enabled by higher available production capacity, sales growth was driven by continued strong demand in all regions and across the entire product range. ATV Segment Result posted a 12 percentage increase from the previous quarter to Euro 58 million, primarily due to the positive effects of increased production levels.

Both revenue and profitability of Infineon’s IMM segment came in at an all time high in the fourth quarter of the 2010 fiscal year. IMM segment revenue increased by 11 percent compared to the third quarter to Euro 413 million. In-line with typical seasonal trends, IMM segment sales experienced strong demand for both power and non-power products. IMM Segment Result improved sequentially by 20 percent to Euro 98 million, with Segment Result margin of 23.7 percent, driven primarily by the top-line development.

Normal seasonal trends as well as higher demand in certain government ID projects drove CCS revenues to Euro 115 million, a 5 percent increase compared to the prior quarter. CCS Segment Result doubled compared to the prior quarter to Euro 12 million, with a Segment Result margin of 10.4 percent. This sequential increase is mainly due to the higher turnover and due to a product mix shift towards higher margin businesses.

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