Siemens: Q1 profit soars, no mobile decision

First-quarter profit at German electronics giant Siemens soared 38 percent on strong performance from its automation, medical and car automotive units. But the mobile phone unit, which is rumored to be up for sale, posted its third consecutive quarterly loss.

Net income for the quarter increased to Euro 1 billion (US$1.36 billion as of December 31, the last day of the period being reported), compared to Euro 726 million in the same period the year before, the Munich-based manufacturer said Thursday.

Group sales for the quarter dipped 1 percent, to Euro 18.2 billion, from Euro 18.3 billion year-over-year, Siemens said.

Sales from the group's mobile phone unit dropped to Euro 1.17 billion from Euro 1.5 billion year-over-year. The unit posted a loss of Euro 143 million in the first quarter, compared to a profit of Euro 64 million the year before.

Siemens sold fewer mobile phones during the crucial holiday shopping season, down to 13.5 million handsets from 15.2 million in the prior-year period, it said. The average selling price also declined year-over-year, from Euro 98 to Euro 86.

The first-quarter loss follows a loss in the fourth quarter of Euro 141 million. Siemens attributed that loss to competition from lower priced handsets and quality problems that delayed the rollout of the company's new 65 series of mobile phones.

The fate of the mobile phone unit still hangs in the air after Siemens executives declined to announce a decision during a telephone conference with analysts and at its annual general meeting early Monday.

"There was a lot of speculation that we would present a concrete solution for the mobile phone business," said Chief Executive Officer Heinrich von Pierer in a speech delivered to shareholders. "That is not the case, or not yet the case. But it is naturally quite clear to us that there is a need for quick action here and for a strategic orientation.

Von Pierer had previously said Siemens has four options for the unit: fix, cooperate, sell or close.

Rumors surfaced last month that Siemens was in talks to sell its mobile phone business to China's Ningbo Bird Co. Ltd. The Chinese company has a distribution agreement with Siemens in China.

Siemens is the world's fourth largest mobile phone maker.

Another loss-maker is the group's IT services unit, Siemens Business Services GmbH & Co. OHG (SBS). The unit posted a fourth-quarter loss of Euro 25 million, compared to a profit of Euro 44 million in the same period a year earlier.

Siemens attributed the change in the year-on-year profit of SBS primarily to "an unfavorable revenue mix and severance charges." In his speech to shareholders, von Pierer spoke of "fundamental changes in the market that require appropriate adjustments."

Last week, the German business publication Manager Magazin, citing sources close to SBS, said Siemens is mulling the breakup of its IT services unit. The plan calls for Siemens to take over the unit's software operations, its hardware business to go to Fujitsu Siemens Computers (Holding) BV, in which Siemens has a 50 percent stake, and its outsourcing activities to be sold off.

Siemens declined to comment on the report.

SBS is a member of the TIS consortium that has submitted a bid to modernize the communications infrastructure of Germany's armed forces, the Bundeswehr. The consortium includes Deutsche Telekom and IBM.

Von Pierer, who has been at the helm of Siemens for 12 years, is handing the reigns over to Klaus Kleinfeld, after the shareholder meeting. Von Pierer will take over as chairman of the supervisory board.

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John Blau

IDG News Service
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