Siemens to restructure IT and telecom units

Job cuts have been rumored for months at Siemens Business Services (SBS), the money-losing IT services arm of Siemens. Now they're official: 2,400 over the next two years.

By 2007, Siemens aims to slash costs at SBS by Euro 1.5 billion (US$1.8 billion), with a large chunk of those savings to come from job cuts, the Munich-based manufacturer said Monday.

In addition, the 60 service locations operated by SBS in Germany, the unit's core market, will be consolidated into 20, said Siemens President and Chief Executive Officer (CEO) Klaus Kleinfeld, speaking to journalists in a webcast conference call.

After selling its German hardware maintenance and repair unit Sinitec Vertriebsgesellschaft mbH in March, SBS is now seeking a partner to take over this "product-related service" outside Germany, according to Kleinfeld.

Asked if Siemens would be interested in folding SBS into a joint venture with an international partner, the CEO said the goal is to improve the operating performance of the IT services unit. "Our aim is to strengthen SBS," he said. "Everyone benefits from a stronger SBS."

Siemens also said that Adrian von Hammerstein, the IT service provider's group president, will be replaced by Christoph Kollatz, former head of the Siemens traffic systems division.

Before coming to SBS, von Hammerstein was chief executive officer (CEO) of Fujitsu Siemens Computers (Holding), a joint venture between Japan's Fujitsu and Siemens.

Kleinfeld said Siemens is currently looking for a new assignment for von Hammerstein within the group.

Siemens said the company also plans "personnel adjustments" in its loss-making communications division (Comm), which was restructured last year, but provided no details.

Kleinfeld declined to pin a number on the planned job cuts.

The restructuring efforts will focus on the unit's enterprise network division, according to Kleinfeld. This business area has been underperforming largely due to a reluctance of small and medium-size enterprises to invest in new VOIP (voice over Internet Protocol) systems, he said.

Earlier this month, Comm Group President Lothar Pauly, a long-time Siemens employee, decided to leave the company to become CEO of German IT service provider T-Systems International, a unit of German telecommunications company Deutsche Telekom.

The move to restructure SBS and Comm are among several cost-cutting measures that Kleinfeld has instituted in a bid to make the German electronics giant a leaner and meaner company.

"We can only stay a technology leader if we continue to invest in innovation, which we will," Kleinfeld said, pointing to the group's Euro 5 billion budget for R&D (research and development).

Responding to questions about the German elections on Sunday, which ended in a deadlock, Kleinfeld said: "We can't afford to wait for necessary reforms in this country. Companies like Siemens operate in a highly competitive global economy."

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