Siemens May Withdraw From telecoms Com, SBS Units, Deutsche Bank Says Deutsche Bank estimates there is a 75 percent chance Siemens will exit both Com and SBS within the six to 12 months.
Dec. 13 (Bloomberg) -- Siemens AG may exit its telecommunications and computer-services divisions within the next year as the German engineering company focuses on its more profitable industrial businesses, Deutsche Bank AG said.
``We discern that management is becoming more and more confident about the future of the core industrial units,'' Deutsche Bank AG analysts led by Peter Reilly said in a Dec. 12 note. ``We also discern a lack of verbal commitment to Com and SBS.''
The Com and SBS divisions are the main cause for Siemens's falling earnings this year, as costs to cut more than 6,500 jobs at the two businesses and losses from fixed networks and computer services hurt profitability. Retreating from Com and SBS would require Munich-based Siemens to part with almost 100,000 workers and about 19 billion euros ($22.7 billion) in annual revenue.
Deutsche Bank estimates there is a 75 percent chance Siemens will exit both Com and SBS within the six to 12 months. At the same time, the Frankfurt-based bank said ``this is a simple judgment call as there is no definitive evidence of the path that Siemens has chosen.''
Deutsche Bank yesterday raised its rating on Siemens to ``buy'' from ``hold,'' with a share price target of 85 euros.
Tackling Underperformers
``We think that there is a good chance that SBS will cease to exist within 6 months,'' the Deutsche Bank analysts said in the note to investors. ``The chances that Siemens will be radical and will exit Com are steadily improving.''
Under Chief Executive Klaus Kleinfeld, Siemens has begun tackling underperforming divisions by retreating from the unprofitable mobile-phone business and dissolving an industrial logistics unit. At the same time, Kleinfeld has made more than 3 billion euros worth of acquisitions in areas such as factory automation, wind energy and medical equipment this year.
Kleinfeld and Chief Financial Officer Heinz-Joachim Neubuerger met with analysts and investors in London last week to provide more details on their strategy. The stock gained on the two trading days after the meeting, helping Siemens catch up some of the lag behind Germany's benchmark DAX 30 Index, which is up 25 percent this year, while Siemens shares have gained 10 percent in the period.
Siemens has declined to provide an outlook for fiscal 2006, which started in October, and said it can't rule out that charges next year will be similar to those amassed in 2005. The retreat from mobile phones has cost Siemens 810 million euros to date, and the SBS division alone lost 690 million euros in fiscal 2005.
To contact the reporter on this story:
Benedikt Kammel in Berlin at bkammel@bloomberg.net.
|
