Ups and downs for German tech sector

German high-tech manufacturing is stuck in a rut

German chipmaker Infineon has shrugged off high-tech gloom, raising 1.5bn euros (£909m; $1.3bn) in an issue of new shares.

The deal, which Infineon said was nearly four times oversubscribed, went ahead despite speculation that the firm's poor share-price performance might force a postponement.

Infineon's shares have fallen 20% since the company issued a profit warning last month, but the new share issue caused a 5% bounce on Friday morning.

But German tech cheer was short-lived. Epcos, a components manufacturer which, like Infineon, was spun off from Siemens in 1999, warned that its third-quarter profits would be below previous expectations.

Epcos shares dropped 6% on the news.

Mixed fortunes

The news from Infineon was not entirely positive.

Infineon: Bullish about chip outlook

Despite the oversubscription, the total amount raised by the firm was less than expected.

When Infineon announced the issue two weeks ago, it said it wanted to bring in 1.7bn euros.

But that was when the firm's shares were well over 27 euros each; Friday's issue valued them at just 25 euros.

Markets were cheered, however, by the firm's resilient reaction to the current slump in the semiconductor market.

Although funds from the issue are mainly being used to pay down company debt, chief executive Ulrich Schumacher said some will be earmarked for a new semiconductor factory in Dresden.

Semiconductor demand has slumped

The company also wants to raise funds for acquisitions, he said.

To bolster its finances, Infineon has announced cost-cutting measures and a hiring freeze as it struggles with falling demand from computer and phone makers.

Gloomy forecast

Epcos, which makes passive electronic components, had seemed to be shrugging off the technology gloom.

But its profit warning struck a deeply pessimistic note.

The company said earnings after tax would probably come in at 19.6m-22m euros, some 15m euros short of its original forecast.

The firm, which blamed a "drastic decline in orders" for the revision, said it did not expect an improvement in business conditions in the fourth quarter.