Siemens on Wednesday admitted it would struggle to increase full-year earnings as restructuring and losses at its mobile handsets unit threatened to offset solid earnings at other divisions.
Klaus Kleinfeld, who took over at the sprawling German engineering and IT group in January, used his first big press conference to give his “personal commitment” that all parts of the company would reach their margin targets within the next 18-24 months. In the short term, the main hurdle to this is the mobile phones business, which has been steadily losing market share amid fierce competition and Siemens' relative lack of experience with consumer end products.
The unit lost a further €138m ($178m) during the quarter to end March, taking total losses for the past four quarters to more than €500m. Unit sales slumped to 9.3m from 12.8m a year earlier, and average selling prices, although up slightly from the previous quarter, remained low at €90.
This performance has hampered Siemens's long search for a partner, although Mr Kleinfeld on Wednesday said he was “positive” a solution would be found.
A decision to carve out the handsets business alongside its much more attractive cordless phones unit - into a separate legal entity within the next three months is aimed at making progress.
Siemens is keen that any partnership does not jeopardise the brand, but signalled it would consider taking a minority stake in any joint venture.
The strategic reorientation of the Information and Communications division, of which the ailing SBS IT unit also is a part, will lead to further, as yet unspecified, charges. This meant it was now “difficult to assess” whether Siemens could reach its goal of raising earnings for the year to the end of September, Mr Kleinfeld said.
Second-quarter figures out on Wednesday confirmed the discrepancy between I&C and the 6-8 divisions mainly in traditional areas of engineering that are doing well.
Power Generation and Automation & Drives, for instance, generated operating margins of 12.7 and 12.3 per cent, respectively. But the ailing divisions made little progress, meaning overall figures remained lacklustre.
Group operating profit edged up slightly, but at €1.1bn fell short of some forecasts.
Organic sales and orders edged up 1 per cent, dented by a 7 per cent decline in Germany, where key large customers have reined in investment.
Siemens aims to further strengthen those divisions that are doing well, including via acquisitions.
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