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Selected Case

published: 25 Aug 2014

Abstract:
In late 2011, Infineon (IFX), a German semiconductor company, is sitting on a €2.4bn cash balance representing 40% of its assets. As part of a financial policy review, management is receiving conflicting advice from different quarters as to whether to pay out some of the cash holdings, how much and by which methods.

Pedagogical Objectives:
The issues covered include (1) the need to link financial policy to business fundamentals, (2) the costs and benefits of holding cash, and why highly cyclical, knowledge-based, capital-intensive companies like IFX need large cash reserves, (3) the mechanics and rationales for different payout methods (e.g., cash dividends, share buybacks, etc.).

Keywords:
Semiconductors, Technology, Cash Holdings, Capital Structure, Payout, Dividends, Repurchases, European Competitiveness Initiative, European Competitiveness, Europe, Strategy

Prizes won:
- Winner 2014 EFMD Case Writing Competition, Finance and Banking Category


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