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Last updated: December 8, 2005 10:41 pm

Siemens wields axe over IT services unit

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Siemens, the German engineering and technology conglomerate, is on the verge of splitting up its most troublesome division after deciding to sell part of its IT services business.

People close to the light bulbs to power stations conglomerate said it would shortly agree to sell its product-related services business to Fujitsu Siemens Computers, the computer company in which it has a 50 per cent stake.

The PRS unit represents about one-fifth of the IT services unit?s ?5bn ($5.8bn) revenues.

The proposed sale follows a declaration by Klaus Kleinfeld, Siemens? chief executive, last month that the group would cut 5,400 jobs at its IT services business, look for a partner for the PRS unit, and restructure and search for other solutions at the rest of the heavily lossmaking division.

Splitting up Siemens Business Services - which lost ?427m in the fourth quarter alone - would mark the latest radical step taken by Mr Kleinfeld to clean up the conglomerate.

He has sold the mobile handsets business, which was previously viewed as its most problematic, as well as dissolved another unit and cut thousands of jobs in his first year as chief executive.

Investors have been wary, however, because of the deepening loss and uncertainty over the future at SBS and a perceived failure to communicate a strategy for its important, but struggling, telecommunications equipment business where some fear it could plump for an expensive acquisition.

Bankers close to European IT services companies, such as France?s Atos Origin and Capgemini, said efforts to sell all or parts of SBS had been difficult.

Atos is still seen as a possible buyer for the outsourcing part of the business and this year made an offer for the whole unit, an offer which was judged ?derisively low? by Siemens.

The final decision to sell PRS to Fujitsu Siemens should take place next
week, the S?ddeutschen Zeitung reported last night.

A sale would help SBS towards its goal of a 5-6 per cent profit margin by April 2007. Siemens is aiming to cut ?1.5bn in costs at the division over the same period.

Part of the problem in finding a solution for SBS is that about one-quarter of its revenues are linked to Siemens while the rest are derived from activities such as consulting and outsourcing, which means it has proved impossible to find a single buyer for the unit.

People close to the company said the solution for the rest of SBS would be ?piecemeal? with some more sales or partnerships and some restructuring.

Siemens was on Thursday night unreachable for comment.

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