Siemens Posts Loss on Nokia JV Writedownby
Siemens AG (SI), Europe's largest engineering company, reported its first quarterly loss in a year as writedowns at the telephone network venture with Nokia (NOK) Oyj eclipsed profitable energy and health-care units.
The net loss in the fiscal fourth quarter that ended Sept. 30 narrowed to 1.13 billion euros ($1.7 billion) from a loss of 2.47 billion a year earlier, Siemens said today in a statement. Sales fell 8.9 percent to 19.71 billion euros.
Siemens follows Nokia in writing down the value of the unit, which has lost ground to rivals including Ericsson AB. The partners are eliminating as many 5,760 jobs, in the second round of cuts since the venture was formed in 2007. Siemens today said profit and sales next year will fall, and that it will fail to expand revenue at twice the pace of the global economy.
"The overall market environment will remain challenging in 2010," Chief Executive Officer Peter Loescher said in a statement. "To ensure the sustainable viability of businesses that have been particularly affected by the crisis we are continuing to rigorously implement all necessary measures."
Analysts in a Bloomberg survey had predicted revenue of 19.21 billion euros. Siemens's quarterly sales haven't fallen for two consecutive periods since the middle of 2007.
The German maker of trains, medical scanners and power generators declined 0.7 percent, or 47 cents, to 67.1 euros as of 9:07 a.m. local time.
Impairment ChargesSiemens took an impairment charge of 1.63 billion euros on the value of its stake in Nokia Siemens Networks in the fourth quarter. The company loss a year earlier stemmed from Siemens booking a 1 billion-euro provision to settle a bribery case, and charges of 1.54 billion euros to cut costs.
So-called sector profit for the industrial, energy and health-care divisions rose to 1.92 billion euros in the fourth quarter, beating analysts' estimates of 1.57 billion euros.
Next year, sector profit will fall to a range of 6 billion euros to 6.5 billion euros, from 7.47 billion euros reported for fiscal 2009. In 2009, Siemens had aimed to at least reach the previous year's level of 6.61 billion euros. Sales in 2010 will fall by a mid-single percentage digit, Siemens said.
"Siemens has a track record of communicating rather conservatively, so there is a good chance they can beat their guidance for 2010," said Ingo Schachel, an equity analyst at Commerzbank AG. He recommends clients to add Siemens shares for a target price of 70 euros.
Osram LossesThe only subsidiary to report an operating loss in the quarter was the Osram lighting business, where Siemens had a deficit of 19 million euros. The biggest earnings contribution came from the health-care imaging unit, at 357 million euros. Siemens booked 173 million euros in restructuring at the industry division in a bid to rekindle growth.
Loescher is sharpening Siemens's focus on energy, health care and industrial operations. Among businesses that Siemens may split off is the hearing-aid division, which Siemens is considering selling, according to people familiar with the plan. Loescher took over in 2007 in the wake of a bribery case.
The company yesterday agreed to settle with former executives, including ex-CEOs Heinrich von Pierer and Klaus Kleinfeld, who were accused of neglecting their duties to prevent wrongdoing at Siemens. Von Pierer, who had worked at Siemens for 38 years before he quit in 2007, agreed to pay 5 million euros, while Kleinfeld will pay 2 million euros.
Siemens has cut its global workforce to about 405,000 this year from more than 420,000 employees as clients in the energy, health-care and manufacturing industries reduce spending. Siemens cut 5,000 jobs alone at its Osram lighting unit.
The company had a "tough" year as orders for its factory equipment and lighting products fell, forcing Siemens to deepen job cuts, Chief Financial Officer Joe Kaeser told analysts on Sept. 29. The order intake last year slumped 16 percent to about 79 billion euros, Siemens said today.