Infineon in class action

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Infineon is facing a class action lawsuit in the US after a court rejected the German semi-conductor group’s motion to dismiss the claim, FT Deutschland, the FT’s sister paper, has learned.

The lawsuit comes at an awkward time, just as Infineon is planning to float its chip division Qimonda on the New York Stock Exchange.

The judgment, which was made by a Californian district judge in mid-May and obtained by FT Deutschland, could lead to settlements worth millions. Infineon said it planned to ask the judge “to review the judgement”.

Infineon investors are accusing Ulrich Schumacher, the former chairman, and Peter Fischl, current chief financial officer, of chip price manipulation through arrangements with competitors, which harmed investor interests.

In 2004, Infineon was forced to admit price manipulation in a San Francisco court and paid penalties of $160m to the US Ministry of Justice.

The company refused to comment on the potential size of compensation to investors as a result of the lawsuit, but a first assessment from the claimants’ side estimates damages of about $500m. Infineon rejected the sum as “pure speculation”.

Infineon said it had provisions worth €140m ($179m) for the second quarter of 2006. “From a current perspective that covers all risks occurring as a result of the ongoing anti-fraud proceedings,” the company said.

US lawyers see the court’s rejection of Infineon’s motion to dismiss the claim as an important success for investors. “Claimants have taken a big hurdle,” said Larry Hamermesh, professor of finances at Widener University, Delaware.

The lawsuit raises doubts over the planned flotation of Quimonda.

One banker at a large German investment bank said it would be important to know whether the claims would remain with Infineon or pass over to Qimonda. “If it does affect Qimonda, I would be careful. Every uncertainty does at least lead to some kind of discount.”

But Thomas Hofman, Infineon analyst at Landesbank Rheinland-Pfalz, said: “Which chip producer does not have a lawsuit to deal with? Investors are asking where the greatest risk is.”

Smartrac, the radio chip producer, had to cancel its planned flotation this year due to accusations of fraud involving its chief executive. Navigon, the producer of navigation devices, might have to postpone its flotation, planned for June, because of court dealings.

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