Siemens to cut 6,500 jobs as group profit jumps

Siemens AG reported a jump in group net profit for its second quarter, but said it would cut an additional 6,500 jobs at its ailing networks division.

The Munich electronics and engineering giant reported a net income of €1.28 billion (US$1.11 billion as of March 31, the last day of the period being reported), up from €578 million in the year-ago period and €538 million in the first quarter, the company said in a statement Thursday.

This year's second-quarter net income includes a gain of €561 million related to the sale of shares in chip maker Infineon Technologies AG, while last year's second quarter included goodwill amortization of €103 million, Siemens said.

Group sales were up 3 percent year-on-year at €21.26 billion from €20.63 billion. Sequential sales growth was 1 percent from €20.99 billion, Siemens said. Noncyclical businesses, such as power generation and transportation systems, posted particularly strong sales increases, the company said.

Siemens' Information and Communications business seems to be climbing out of a trough after restructuring measures that saw about 20,000 jobs cut last year. Information and Communications Mobile (ICM), which sells mobile phones and mobile networks, is profitable. However, networking-equipment arm Information and Communication Networks (ICN) is still struggling.

"We can't sound the all clear for ICN, although the enterprise business is back in the black. We have experienced a deeper slump in our carrier business than expected. The market is in a dramatic state," said Heinrich von Pierer, Siemens president and chief executive officer at a press conference broadcast via the Web.

Another 6,500 jobs, mostly outside Germany, will be cut by the end of next year at ICN. These cuts are to help the unit save €1.5 billion in costs in fiscal 2003, Siemens said. The company expect to incur costs of €300 million in the second half of fiscal 2002 in implementing these additional cuts. ICN will continue to realign its business to focus on convergence technologies, broadband and optical-transmission technology, Siemens said.

In a separate news release Siemens on Thursday announced it had signed a memorandum of understanding with contract manufacturer Sanmina-SCI Corp. for the sale of three of ICN's manufacturing facilities to the San Jose, California, company. The deal includes a multi-year manufacturing supply agreement. No financial details were disclosed.

ICN reported a second-quarter loss before interest and tax of €158 million, compared with a €50 million profit last year. Sales at the division totaled €2.66 billion, a 16 percent drop from €3.16 billion last year.

Earnings before interest and taxes at ICM, the mobile-phone group, amounted to €44 million, compared with €6 million in the year ago period. Sales at ICM came in at €2.73 billion, compared with €2.75 billion last year.

Siemens, the world's number three mobile-phone maker in 2001 in terms of unit sales, according to Gartner Inc., said it sold 8.3 million phones in the first three months of 2002, down from 9 million in the last three months of 2001. South Korea's Samsung Electronics Co. Ltd., the fourth largest mobile-phone vendor in 2001, is on Siemens' heels, but the German handset maker dismissed talk about a "psychologically important number three position."

"We are not competing in the Olympics and it doesn't matter if we win a bronze medal. We will continue to strive for our group to be profitable and increase profitability," said Von Pierer. "However, in the mid- to long-term we are of course aiming for a larger market share. What we aim for is profitable growth."

Overall Siemens said it is satisfied with the second-quarter results as most of the company's operating units improved their earnings. However, Siemens is not providing a financial forecast because of the continued instability of the worldwide economy.

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