Questions for Infineon

1. Please provide a brief analysis of Infineon’s business and strategy. Which especial
characteristics of these may have a significant impact on the type of financial policies adopted
by the firm?

2. Why did Infineon performed so badly after 2008? Was it essentially a business problem
(operational and strategic), the result of poor financial policies or a combination of both?

3. What were the key elements of the corporate turnaround that was performed after 2009? In
particular, which financial policies were pursued to help rescue the firm from insolvency?
What were the difficulties and risks associated with such financial policies?

4. Why did Infineon announced its intention to resume dividend payments in late 2010? What
are the risks of such decision?

5. Is the level of cash hold by the company in 2010 excessive? What are the implications of such
level of cash holdings? Does it contribute to value creation, or destruction? What are the pros
and cons of such high level of cash? Why should a company hold cash when it has easy access
to bank credit lines? Is it rational to hold large cash reserves financed by debt? Should the
cash level be determined by some especial characteristics of the firm’s business and strategy?

6. How do you evaluate the company’s capital structure 2010? Is the company’s debt level sub-
optimal? Given the recent operating performance do you believe it would make sense to re-
lever the company? What would be the pros and cons of taking in more leverage? Should the
leverage level be determined by some especial characteristics of the firm’s business and
strategy?

7. What is your recommendation? Keep the current policy? Use the excess cash to buyout
shares, increase dividends, or both? How much cash would you give back to shareholders?