How To Make A Fortune In Semiconductors
One of the most charismatic and outspoken semiconductor CEOs of recent times was Dr Ulrich Schumacher of Siemens Semiconductor later renamed Infineon.
In November 1998, Heinrich von Pierer, CEO of Siemens, told Schumacher that the semiconductor business would be spun off.
The semi business was then losing DM 1 billion a year. For von Pierer, the benefit of telling the markets that the semiconductor division was going to be divested was a way to minimise the hit which the Siemens share price might have taken from the dire results of the semi operation.
For Schumacher it was an opportunity to rejoice. “The losses were the door opener to the IPO”, said Schumacher, “the timing is excellent. For three years I’ve been planning for this. The only way from here is up. The only question is ‘How fast?’”
Siemens delayed the IPO for eighteen months – until the spring of 2000.
Shortly before the valuation, Schumacher said: “I’d prefer a low valuation. Of course Siemens would like as high a valuation as possible because they are getting the money, but if I have a high share price from the start I’m going to be under pressure to maintain it.”
The Siemens board were sniffy about the remark, pointing out to Schumacher that, as well as being boss of the semi operation, he was also a member of the Siemens main board, and therefore shouldn’t be saying that Siemens’ best interests were not his main concern.
Unfortunately for Schumacher, the Siemens board got what it wanted, and Infineon’s shares ran up to €75 at the IPO on the Frankfurt exchange valuing Infineon at €45 billion – making it Germany’s seventh most valuable industrial company.
Six months after the IPO Infineon’s shares were still at €65.
Siemens, which sold 29% of Infineon at the IPO at €35 a share, took an immediate €7 billion from the offering while retaining a 71% holding worth €30 billion at the immediate post-IPO price.