Siemens should spin off its troublesome telecommunications equipment unit in a move that would benefit the German conglomerate and its shareholders, according to one of the group’s five biggest investors.
DWS, which is Germany’s largest fund manager and owns about 2 per cent of Siemens, told the group’s annual meeting yesterday that spin-offs had worked for Bayer and HVB, with Lanxess and Hypo Real Estate respectively, and that Siemens should follow suit.
The call reflects concern among investors that telecommunications has little place in Siemens’ portfolio of predominantly industrial assets, and that the group has yet to formulate a convincing strategy for the division, which lost €33m in the first quarter stripping out the effects of a disposal.
The telecommunications equipment industry is on the verge of what many analysts believe to be another wave of consolidation following Ericsson’s purchase of the UK’s Marconi.
Henning Gebhardt, head of German equities at DWS, said a spin-off by Siemens could propel the shares to €100, combined with a more aggressive dividend policy. Siemens shares rose 6.5 per cent to close at €76.
The comments by Mr Gebhardt were backed by other shareholders at the meeting and by many analysts.
Ben Uglow at Morgan Stanley said: “It would be a very clear avenue for creating value for Siemens’ shareholders.”
Klaus Kleinfeld, Siemens’ chief executive, failed to address the issue directly on Thursday but hinted to analysts late last year that
such a move could be considered.
According to a banker close to Siemens, however, a spin-off could endanger other parts of the company because the so-called Com unit is in charge of the lucrative government business for the whole group.
The debate over Com’s future came as Siemens presented surprisingly strong order figures for the first quarter, up 31 per cent to €20.7bn at a group level.
Coming after the recent strong rise in orders from rival Alstom, the 63 per cent increase in power generation orders at Siemens underlined that industrial companies – and particularly utilities – have started dramatically increasing their capital spending.
The German group saw strong order books in
most of its core industrial businesses such as power transmission and transportation.
The strong orders, which Siemens warned could not be extrapolated for the whole year, compensated for weak profitability in the quarter.
Operating profits for the period were down 10.4 per cent to €1.4bn.