Siemens launches phones amid worries over fraud probe

Siemas has been a global power, analyst said, but the fraud investigation doesn't help matters with a sale

Another longtime Siemens customer, America-Mideast Educational & Training Services in Washington, will deploy 40 of the new phones next month, said Ugur Usumi, director of information technologies at the training company. Siemens had the most reliable technology when America-Mideast evaluated voice over IP systems and unified messaging applications several years ago.

"It is good to see that a company as large as Siemens can adapt to changes quickly," he said.

Usumi said the fraud investigation probably won't influence his future decisions about whether to buy from Siemens. But a possible sale of the Siemens business unit "might" influence him.

A Siemens spokeswoman, Monika Brucklmeier, confirmed last month that talks are continuing with several interested groups to sell the company's unprofitable Siemens Enterprise Networks subsidiary. The unit employs 17,000 people in 80 countries and is called Siemens Communications in the U.S. Jacob Rice, a spokesman for Siemens Communications, said the process for determining what happens to the unit is "open-ended" and could result in creation of a partnership where Siemens has a minority interest.

No one at Siemens would confirm reports that talks had collapsed with two buyout companies. But Freedman and other analysts said those reports cast a negative light on sale prospects.

"They're not inspiring much confidence," she said, adding that IT managers should weigh what might happen to any company they are considering purchasing from. "IT wants to extend the life of a network as long as possible, but with Siemens Enterprise Communications relatively unstable, how do you guarantee it will be Siemens Enterprise for three or six months?"

Freedman also said the new phones, while adding "bling" to a user's desktop, do not contain features that distinguish them much from the IP phones of competitors such as Cisco Systems, Avaya and Nortel Networks.

"Selling the company is made harder with the [fraud] investigation," said Zeus Kerravala, an analyst at Yankee Group Research in Boston. As a result, he too urged IT managers to go slow when buying Siemens products. He still believes, however, that Siemens generally has good technology.

Another analyst, Allan Sulkin of TEQConsult Group, said "There's always some risk to IT buyers" when a sale of the vendor is under way. "You will know where Siemens is today, but won't know in two to three years, so end users do have to take that into account."

Siemens remains a strong player in communications products and is second behind Avaya in total enterprise voice shipments globally, Sulkin said. Siemens also offers direct sales and service in more countries, a total of 78, than any other vendor. "They've been a global power," he added. "But the fraud investigation doesn't help matters [with a sale]."

The analysts said Siemens AG is hoping to avoid with its communications unit what happened last year when it tried to sell its unprofitable mobile phone manufacturing unit and ended up giving Taiwan's BenQ Corp. US$322 million to take control of the unit. In September, BenQ Mobile filed for bankruptcy protection in Germany after its Taiwanese parent decided to stop investing in the money-losing operation.

The IDG News Service contributed to this story.

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