News Feature

Siemens Grows Profit as Improvement Plan Kicks In

April 27, 2006 — CIO —

German electronics giant Siemens posted a profit gain on Thursday for the second quarter of its fiscal year. It follows four consecutive quarters of lower earnings, showing signs that restructuring efforts introduced by the group’s new chief executive officer (CEO) are taking effect.

Net income rose 14 percent to 887 million euros (US$1.07 billion as of March 31, the last day in the quarter being reported), or 1.00 euro per share, from 781 million euros, or 0.95 per share, in the same period a year earlier, the company said.

Second-quarter net revenue increased to 21.5 billion euros, from 17.7 billion a year earlier.

Siemens is in the middle of a two-year program headed by CEO Klaus Kleinfeld to bring the group’s main operating units within set profitability targets. Since taking over the helm of the German company in 2005, Kleinfeld has been slashing thousands of jobs and either selling, dissolving or giving away unprofitable units.

Last year, Siemens paid Taiwan’s BenQ to take control of its loss-making mobile phone manufacturing business.

During the second quarter, the company’s information and communications group, called Comm, continued to underperform. Group profit dipped to 27 million euros from 108 million the year before. Sales were up 7 percent to 3.4 billion euros, compared with 3.2 billion a year earlier.

The group’s carrier networks business delivered most of the sales growth year on year, Siemens said. Sales in its enterprise networks business remained flat, and those in its devices business dropped.

Although sales in Siemens Business Services, which provides IT services to internal Siemens units and external customers, rose 8 percent to 1.4 billion euros, from 1.3 billion, group profit plunged 50 percent to a loss of 194 million euros, compared with a loss of 129 million the year before.

Siemens attributed the loss to higher severance charges, totalling 155 million euros, compared with 63 million a year earlier.

At the end of the second quarter, Siemens sold the product-related services business of SBS to Fujitsu Siemens Computers (Holding).

The Munich company, Europe’s largest maker of medical equipment, agreed on Thursday to acquire Diagnostic Products for about $1.7 billion.

-John Blau, IDG News Service

Check out our CIO News Alerts and Tech Informer pages for more updated news coverage.

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