Siemens' listing on a U.S. stock exchange in the
spring of 2001
Siemens rigorously reorganizes – a successful start in
fiscal 1999
Pierer presents the "different Siemens" at the Annual
Shareholders' Meeting
Siemens has targeted a number of key strategic
moves in the past fiscal year to strengthen profitability
and further improve its global market position. "The
implementation of current measures will culminate in
Siemens' listing on a U.S. stock exchange in the
spring of 2001," stated Siemens President and CEO
Heinrich v. Pierer at the company's Annual
Shareholders' Meeting in Munich on Thursday,
February 18. Siemens will then be a "different"
company, Pierer said. It will have a convincing
portfolio. Decision-making will be rigorously targeted
toward increasing company value. Siemens'
accounting and financial reporting, converted to the
U.S. GAAP standard, will be even more transparent.
And the company's freedom to make acquisitions will
have been substantially increased. Siemens' goal for
the current fiscal year (ending September 30, 1999)
remains unchanged: earnings must outpace the
growth in sales – and in a double-digit amount. For
fiscal 1998, an unchanged dividend of DM1.50 per
five-mark share will be proposed to shareholders.
In his speech to Siemens' Annual Shareholders' Meeting – the
first ever to have been broadcast live on the Internet – Pierer
stressed five main points crucial to the company's future. As
outlined in the "Ten-Point Program" approved in July 1998, the
"different Siemens" will be characterized by an optimized
business portfolio, improvements in the internal structure of the
company's business segments, an updated top program,
decision-making rigorously targeted on economic value added,
and the consequences of a U.S. stock exchange listing.
Siemens is – and will remain – an electrical engineering and
electronics company, Pierer emphasized. Supported by the
spread of digitization in electronics, the components, products
and systems in the various Siemens business segments are
increasingly being networked. Heavy-current applications are
being linked with data and communications systems. Networking
is happening across all Siemens' activities. "'Siemens – the
Network and Solutions Provider' would be the best
comprehensive description of our business idea of the future,"
Pierer stated.
The main prerequisite for success is to have a leading global
market position. To this end, Siemens intends to achieve number
1 or number 2 positions in over 80 percent of its business
activities worldwide. The company has already reached the 60
percent mark.
Each business must prove its ability to sustain long-term
profitability on its own, stressed Pierer. All businesses have – at
least – to earn their capital costs. "Where they cannot achieve
their goals alone within a set time limit, other solutions must be
considered, including alliances and divestments," he stated.
Pierer again explained the decision announced in November
1998 to spin off the Components segment, which comprises the
Semiconductors Group (HL), the Passive Components and
Electron Tubes Group (PR) and the Electromechanical
Components Group (EC). The semiconductors business is
extraordinarily capital intensive and has absorbed a lion's share
of Siemens' investment resources in recent years, Pierer said.
The company must – and will – give the other Groups greater
opportunities for future growth. Moreover, semiconductors is
subject to extreme price cycles. The process of legally separating
this business from Siemens will be completed early in the
summer of 1999. The business will then be publicly listed, at the
earliest shortly before the end of this year or at the beginning of
next year.
In the first half of the year, a joint decision with Japan's Matsushita
will be made as to how and when the highly successful Passive
Components and Electron Tubes Group will be taken public. At
the end of February, a decision will be made as to whether a
public offering is also a suitable solution for Electromechanical
Components. As an alternative, Siemens could sell the business.
In addition, plans call for divesting IC Products' copper
communications cables business. And a public offering of
Siemens Nixdorf Retail and Banking Systems, which handles
point-of-sales and self-service systems, is being considered.
The approximately 60,000 employees affected by these moves
can be assured that the new companies will also offer challenging
and interesting work with attractive conditions, said Pierer.
Siemens has proved this with a number of major divestments in
recent years. "A rigorous portfolio policy is by no means a
one-way street leading only to divestments," Pierer added,
referring in this connection to the acquisition of the industrial
activities of Switzerland's Elektrowatt – primarily its building
technology sector – and the fossil-fuel power plant business of
Westinghouse. However, Siemens has not caught the merger
fever, Pierer stressed. Its recent acquisitions have involved
point-by-point portfolio optimizations. In addition, Siemens has
improved the internal organization of its business segments. The
reorganization of Siemens' Industry segment in 1997 and of its
Information and Communications segment on October 1, 1998
have affected roughly two-thirds of the company.
In addition to structural changes, Siemens is also updating its top
program, whose main fields are productivity, innovation and
growth. Since the program's initiation five years ago, productivity
gains have risen from four to around ten percent a year,
registered inventions have doubled to over 6,000 a year and new
orders have climbed by almost DM40 billion to nearly DM120
billion. This growth has been generated almost exclusively in
Siemens' international markets. "The motto of the expanded top+
program is: clear goals, concrete measures, rigorous
consequences," Pierer noted.
To boost profitability, Economic Value Added (EVA) was
introduced on October 1, 1998 as the obligatory measure of
management performance throughout Siemens. Now, the sole
criterion of profitability is whether a business unit's earnings
exceed its capital cost. Levers for increasing EVA include
divesting assets that are no longer needed, reducing inventories
and receivables, and pruning the business portfolio. The
compensation system for Siemens' senior level management is
also being coupled to EVA. If the Annual Shareholders' Meeting
agrees, a stock option plan for senior managers will be set up to
take effect retroactively as of October 1, 1998.
To prepare for a public listing in the U.S. in the spring of 2001,
the company's accounting and financial reporting will be
converted to the U.S. GAAP accounting standard by fiscal 2000.
A U.S. listing will provide better access to the world's largest
capital market and offer the possibility of transatlantic company
takeovers using stock swaps. Pierer: "We have already
mastered the globalization of our product markets. Now we
intend to get into the global capital market as well."
Changes on the capital side include a number of additional
measures to be proposed at the Annual Shareholders' Meeting.
Shareholders will be asked to approve the redenomination of
Siemens' par-value stock to no-par value stock and the
conversion of its bearer stock into registered stock. They will also
be asked to approve the creation of an additional Authorized
Capital, increasing the capital stock by up to DM350 million
without preemptive rights and enabling Siemens to acquire
companies and equity stakes quickly and without tapping the
stock market. No such moves are planned at the moment, Pierer
noted. Shareholders will also be asked to grant authorization for
stock buybacks and to approve the elimination of multiple voting
rights as well as the complete elimination of preferred stock.
Pierer: "Fiscal 1998 was a year of transition, in which overall
earnings performance was not satisfactory. The year was marked
by outstanding individual performances in most Siemens
businesses, but was also impacted by acute difficulties in some
Groups as well as by high extraordinary restructuring costs."
Sales climbed ten percent to DM117.7 billion and new orders six
percent to DM119.6 billion. Net income before extraordinary
items increased two percent to roughly DM2.7 billion.
Extraordinary items posted a net negative result of just over
DM1.7 billion. As of September 30, 1998, Siemens had 416,000
employees worldwide, of whom 222,000 were located outside
Germany. On a comparable basis, the company's international
workforce grew by 6,000. Some 3,000 new employees were
hired in Germany.
Following the unsatisfactory performance of some of its individual
Groups, Siemens demonstrated that it could act quickly and
rigorously. Thus, Semiconductors closed the new chip plant it had
opened in northeast England only last year and converted to
64-megabit production. The Group expects a substantial
improvement in its earnings this fiscal year and a return to
profitability next year. The new management at the Transportation
Systems Group has developed a restructuring plan. This Group
too should return to profitability next year.
"Figures for the first quarter of the current fiscal year put us in our
targeted corridor for the year," said Pierer. "Virtually all of our
operating units show improved earnings. We are making
progress across a broad front." Sales jumped 16 percent to
DM28.8 billion owing to large project billings. New orders
increased six percent to DM31.6 billion and earnings after taxes
rose 12 percent to DM639 million. The fiscal 1999 goal of having
"earnings outpace the growth in sales – and in a double digit
amount" can be achieved, despite less than favorable market
conditions.
Pierer pointed to the rise in the Siemens share in the current
fiscal year. The share has clearly outperformed the DAX since
October 1, 1998 – an indication that Siemens' new path is being
rewarded by the capital markets. Pierer concluded his speech
with a quote from Siemens' international television advertising
campaign: "We are Siemens - we can do that." |
