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Siemens Unit Sale Lets Loescher Plug Hole in Profit

Peter Loescher, chief executive officer of Siemens AG. Photographer: Daniel Acker/Bloomberg
Peter Loescher, chief executive officer of Siemens AG. Photographer: Daniel Acker/Bloomberg

Dec. 15 (Bloomberg) -- Siemens AG’s plan to sell its computer-services unit to Atos Origin SA will let Chief Executive Officer Peter Loescher end years of losses from a business that proved unfixable for his two predecessors.

The Munich-based engineering company said yesterday that it will divest Siemens SIS in an 850 million-euro ($1.14 billion) transaction. It will receive a 15 percent stake in the combined entity, as well as cash and a convertible bond. Siemens will contribute about 250 million euros to help the integration.

“SIS has been an underperformer in the Siemens portfolio for as long as it has been a division,” said James Stettler, an analyst at UniCredit in London. He recommends clients “hold” Siemens shares and sees them trading at 85 euros in a year. “We view this deal as another positive step in focusing the group on its core activities, which should further enhance the earnings quality of the group.”

While Siemens said the deal will have a “considerable negative earnings impact” next year, the sale helps Loescher eliminate a major source of losses in recent years as both demand and the workforce shrank. SIS lost 463 million euros in the quarter ended Sept. 30, after Siemens announced 4,200 job cuts earlier this year. An additional 1,750 jobs reductions will be part of the Atos deal, Siemens said yesterday.

Siemens climbed 1.5 percent in Frankfurt trading to 92.53 euros as of 9:44 a.m. local time. Atos added 9.6 percent to 37.06 euros in Paris.

Leapfrogging Rivals

Both Heinrich von Pierer and Klaus Kleinfeld, Loescher’s predecessors, struggled to cut losses at the division, scaling back the workforce and revamping the division’s structure and management. Christoph Kollatz, a Siemens veteran of 20 years, left as head of SIS a year ago, weeks after Chief Financial Officer Joe Kaeser said an initial public offering for the information-technology unit is a possibility.

Siemens SIS competes with computer-services companies such as Cap Gemini SA of France and Deutsche Telekom AG’s T-Systems unit, as well as Accenture Plc. Atos will leapfrog Cap Gemini to become the largest European IT service provider.

The opportunity to become the regional market leader was a key attraction of the Siemens deal, Atos executive Gilles Grapinet said by phone. While the merger will, “by definition, involve cultural challenges,” Siemens’ participation as a major Atos shareholder should help ease integration, he said.

Siemens SIS has more than 32,000 employees. Revenue in the most recent fiscal year, which ended Sept. 30, fell 11 percent to 4.2 billion euros. Annual sales for the newly created business would amount to about 8.7 billion euros, according to the statement. It will have 78,500 employees worldwide.

Previous Shakeups

By the time the transaction is set to close, SIS will probably have 28,000 employees, compared with the 35,000 employed at the division in March 2010, according to Siemens.

The German company has removed underperforming businesses from its balance sheet in the past. That includes its telephone network division, which Siemens shifted into a joint venture with Nokia Oyj, and its mobile-phone business, which Siemens handed to an Asian manufacturer -- shortly before the unit went bankrupt. The company has instead sharpened its focus on industrial goods such as turbines, trains and medical equipment.

Loescher, who took over in 2007, said last month that Siemens has “closed the chapter” on a dozen years of restructuring and will reward shareholders’ stamina with a record dividend. The executive, who was paid almost 9 million euros in salary and bonuses last year, is the first person leading Siemens in its history to come from outside the company.

Atos Stake

The Austrian-born Loescher is moving on from the years of overhauls that saw Siemens pull out of the telecommunications on which the company was founded in 1847, cut tens of thousands of jobs, and bolster its offering of environmental technologies.

Siemens said it will get about 12.5 million Atos Origin shares valued at 414 million euros, giving it a 15 percent stake in the combined company, as well as a five-year convertible bond of 250 million euros and about 186 million euros in cash.

Siemens will also have its own information technology serviced by the new company for seven years, a deal valued at 5.5 billion euros, according to Siemens.

“The fast execution of the sale to Atos is positive,” said Ingo-Martin Schachel, an equity analyst at Commerzbank in Frankfurt. “The price, however, is just in line with our expectations.”

To contact the reporter on this story: Benedikt Kammel in Berlin at

To contact the editors responsible for this story Tom Giles at; Benedikt Kammel at

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