Reorganization of Siemens' Information and Communication Networks Group gets off the ground
Siemens launched Operation 2003 last July as a measure to achieve its medium-term margin targets. The first and most critical of the five action items defined in this initiative is a return to profitability in the Information and Communications area. The reorganization of the Information and Communication Networks Group (ICN) is a key priority. Talks with the Works Council on the measures necessary to achieve this were continued today. Thomas Ganswindt, President of ICN, commented: " We have launched a program of cost cutting and profit improvement with a target of EUR2 billion in savings and positive earnings effects. We will achieve this by focusing on our customers and our product offerings as well as by concentrating on our traditional strengths." In addition to the job cuts of more than 5,000 (2,000 in Germany) already announced, there will be additional personnel adjustments at ICN affecting some 5,000 jobs (2,000 in Germany). Furthermore, ICN confirmed that it will halve the number of its production facilities worldwide. Implementation of the measures previously announced for the Information and Communication Mobile Group (ICM) is on schedule. ICM has spelled out its €400 million cost reduction program. Here, 2,000 jobs will be cut by the end of the current fiscal year, half of them in Germany.
For many years, the Information and Communication Networks Group (ICN) has been an earnings leader at Siemens. With its EWSD telephone switching systems for network operators and Hicom system for enterprise customers, the Group occupies a leading position worldwide. With the convergence of voice and data transmission and the increasing importance of the Internet, ICN has developed additional expertise in the areas of IP convergence, broad band access, optical networks and IP routers. For example, today the Group is Number 3 in IP routers for carriers and Number 2 in infrastructure systems worldwide. While ICN has weathered the current upheaval in the market and considerable declines in investment by key telecoms and enterprise customers better than most of its competitors, the Group will still have to adjust to today's changed conditions and reorganize its activities.
The first priority is to optimize businesses within the Group's existing portfolio. To achieve this, ICN is applying the tools of Siemens top+ program in its PACT (Profit and Cash Turnaround) initiative. The restructuring will follow these principles:
Earnings before sales In all its businesses, ICN is placing a higher priority on earnings increases than on sales growth. In this manner, the Group's focus will be on profitable businesses.
Strengthen ICN products Concentration on sales of ICN's own products in order to maximize value added.
Cost reduction: ICN intends to set the benchmark for cost structures within the information and communications industry. This will require further personnel adjustments affecting some 5,000 jobs by the end of 2002.
Optimization and concentration on value added: ICN will continue to cover the entire value chain while maintaining its own production facilities – but will reduce their number by half. Highly automated production facilities with high value-added in Germany, Brazil and China will continue in operation. Together with other Siemens Groups, ICN will also continue to operate the configuration centers worldwide which will continue functioning as flexible production facilities geared to changing market requirements.
Optimization of sales channels: This includes development of new business models, strengthening of key account management and expansion of indirect sales. Concentration of direct sales on attractive customer segments.
Leadership in innovation: ICN will continue to be a trendsetter in innovation in its key areas of focus. The Group intends to maintain its current R&D expenditures at their current level – of this some 80 percent will be dedicated to the key technologies of IP convergence and broad band access.
"With these first steps in our PACT program, we have paved the way for our turnaround. I am convinced that with our global presence, our excellent customer relationships with successful carriers and companies and our comprehensive know-how in voice communication we will succeed in resisting the general market trends and make ICN a long-term earnings leader at Siemens once again," said Thomas Ganswindt.
Last spring, Siemens' Information and Communication Mobile Group (ICM) presented its program to get its mobile phone business back in the black. The program includes measures to adjust production capacities and cost structures. As announced, an additional package of measures has been developed for the mobile networks business, where savings in the range of €400 million are expected to be achieved through, for example, efficient design-to-cost processes, global sourcing in purchasing and related personnel adjustments. Plans call for cutting some 2,000 jobs – half of them in Germany – by the end of fiscal 2002.
This press release contains forward-looking statements based on beliefs of Siemens' management. The words "anticipate," "believe," "estimate," "forecast," "expect," "intend," "plan" and "project" are used to identify forward-looking statements. Such statements reflect the company's current views with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results to be materially different, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products, lack of acceptance of new products or services and changes in business strategy. Actual results may vary materially from those projected here. Siemens does not intend or assume any obligation to update these forward-looking statements.
Reference number: AXX 200110.01 e
Eberhard Posner
80312 Munich
Tel.: +49-89 636-33470; Fax: -33746
E-mail: eberhard.posner@cc.siemens.de |
