One division dissolved, its biggest problem business sold off, and thousands of excess workers got rid of ? the first 10 months of Klaus Kleinfeld?s tenure as chief executive of Siemens have been action-packed.

But in spite of the decisive nature of his attempts to knock the German industrial and technology conglomerate into shape, investors remain sceptical. Thursday?s presentation of full-year results could provide further evidence why ? and raise questions whether Mr Kleinfeld is a radical reformer or someone content to tinker at the edges.

?For nine or 10 months? work I think what Kleinfeld has achieved is pretty good going,? says Ben Uglow, analyst at Morgan Stanley. ?But the problem with Siemens is that a good news flow is followed by poor results and that affects sentiment.?

Siemens is a sprawling concern that makes everything from light bulbs to power stations, medical equipment to high-speed trains. But in recent years it has been the technology parts that have caused it problems.

This year it solved some of its troubles by offloading the loss-making mobile handsets business to BenQ of Taiwan. But questions persist about its wider telecoms business ? known as the Com division, its largest, which makes equipment for mobile and fixed-line operators ? as well as IT services unit SBS.

Mr Kleinfeld?s first attempts to tackle the problems came the day after federal elections in September. Thousands of jobs were cut at SBS in an attempt to save ?1.5bn ($1.8bn) by 2007 with more to come at Com, while the industrial logistics division was dissolved into other units. This came on top of ambitious profitability targets for all divisions to reach by 2007.

The actions drew favourable comparisons with those of his predecessor, Heinrich von Pierer. ?This is more than what Mr von Pierer did in the past and is a step forward for Siemens,? says Roland Pitz, analyst at HVB in Munich.

Analysts see SBS and Com as Mr Kleinfeld?s two most pressing issues. Many believe that Siemens has a handle on the former and has realised it is increasingly difficult to go it alone.

About 25 per cent of SBS?s revenues come from Siemens itself, with the rest from consulting and outsourcing businesses, leading to the suspicion that any solution will involve many partners.

A frequently mentioned solution is that partnerships or disposals would be formed with Japan?s Fujitsu and France?s Atos Origin.

The problem at Com is the more intractable and is where investors are awaiting direction.

?There are two things shareholders really want: the first is a proper utilisation of the balance sheet through a big share buy-back or a higher dividend. And the second is a proper strategy for Com,? says Mr Uglow.

Mr Pitz says: ?Com is the big task for 2006.?

The problem is to work out how the telecommunications equipment market is going to evolve. Siemens is relatively successful in mobile infrastructure, but less so in fixed-line.

One Frankfurt-based banker who knows Mr Kleinfeld well says he is prepared to draw lessons from this and jettison the under-
performing half if necessary.

?There are no taboos with Kleinfeld. Everything is open. If he wants to dispose of something he will,? the banker says.

A senior former Siemens executive says: ?Kleinfeld will be bold if he needs to be and he will be supported in that.?

But not all are convinced. The purchase of Marconi of the UK by Ericsson has raised the prospects of further consolidation in the sector.

Few expect Siemens to be an idle spectator, but how it becomes involved will be watched keenly.

Mr Uglow says the market will remain sceptical as long as it is unsure what the exact strategy for Com is.

?The biggest risk [in Com] is that they go down the acquisition path in fixed networks, which the market will really not like.?

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