INTERVIEW-Siemens says stake swap with Toshiba possible
By Sabine Bub and Lucas van Grinsven
--From AOL.-- Cooters
MUNICH, Germany, Dec 20 (Reuters) - German electronics company Siemens said on Wednesday it could intensify its mobile phone cooperation with Japan's Toshiba with each taking minority stakes in the other.
The companies, which announced earlier this month they would equally share development costs of third-generation UMTS mobile phones, will decide next year whether to swap shares, Siemens board member Volker Jung told Reuters in an interview.
The jointly developed phones, which can handle Internet applications such as pictures and music and will be out by early 2002, will be marketed under the companies' own brand names.
Joining forces could also smooth relationships when both companies move into each other's territory. Siemens is eager to expand in Asia and Toshiba wants to enter the European market. Both companies have a position to defend in their home markets.
Siemens says it has eclipsed Sweden's Ericsson in the third quarter of 2000 as the number three mobile phone maker in the world with a market share of around 10 percent, while Toshiba is among the top three players in Japan.
While reaping the benefits of lower UMTS development costs, projected at 800 million euros ($718.8 million) a year, Siemens will bring manufacturing and European marketing experience to Toshiba.
The Japanese company will in turn help the Germans with Internet applications for mobile phones and miniaturisation which it has pioneered with i-Mode in Japan, Jung said. Toshiba's handheld PCs will be integrated with cell phones.
Before the alliance with Toshiba leads to results, Siemens will launch a handheld computer with built-in phone with Japan's Casio at the CeBit Hanover trade fair in March 2001.
MOBILE PHONES COST HALF OF SIEMENS' MARKETING BUDGET
Jung said Siemens has catapulted itself into the global top three of mobile phone makers with the right mix of phones and a fat marketing budget.
Siemens spent several hundred million euros on marketing its mobile phones in the fiscal year ended 30 september 2000, triple the amount it spent in fiscal 1999 and half of its total marketing budget, Jung said.
The mobile phone division, which includes networks and systems, generated only 12 percent of Siemens' total sales.
Despite the costs, Jung said the unit was producing operating returns of 13 percent over the full fiscal year, which would make it the number two in profitability after Finland's Nokia, the world's largest phone maker, which has margins of 20 percent.
U.S.-based Motorola, the world's number two, reported third-quarter operating profit margins of 6 percent, and Ericsson a negative 29 percent, while Netherlands' Philips was around zero.
"Our operating profit margin is one of the advantages that's never mentioned," Jung said.
He said that the margin had been thinner in the fourth quarter, when supplies were tight and marketing expenses high.
The secret to the high margins was that Siemens had limited its cost base by focusing only on GSM handsets and third-generation UMTS phones. It has ignored the CDMA and TDMA standards that are big in the U.S. and Japan.
"We restrict to GSM and UMTS and don't have all the models. We also delayed the decision to come with CDMA products because we hoped the U.S. market would switch to GSM," Jung said.
That bet may pay off well, as U.S. operators like AT&T Wireless and BellSouth's Cingular Wireless are set to add GSM to their current second generation CDMA/TDMA networks, which would make it easier to upgrade to UMTS instead of the competing CDMA2000.
"I'm surprised nobody, so far, got the message," Jung said, adding that GSM and UMTS looked clear winners around the world.
The fact that Siemens was working with China Academy of Telecommunications Technology on developing a separate third generation standard, named TD-SCDMA, did not mean the company was abandoning the view of a single global cell phone standard, because the system would be compatible with UMTS.
Jung said the Chinese could ask whatever they wanted to and still get it, because of the law of numbers. "I don't care what they want. I'm not going to disagree with my best customer. It's such a huge market."
Last year Siemens sold 10 million phones in China alone, of its total 24 million mobile phones sold worldwide.
07:33 12-20-00 |
