Siemens Posts 52 Percent Drop in Profit
Posted on: Thursday, 28 July 2005, 06:00 CDT
FRANKFURT, Germany - Siemens AG posted a 52 percent drop in third-quarter net profit on Thursday because of losses in the mobile phone unit it is selling to Taiwan's BenQ.
The company, which makes everything from power plants to light bulbs to health care equipment to trains, earned euro389 million ($466.4 million), or 42 euro cents (50 U.S. cents) a share, compared with euro815 million, or 88 euro cents a share, in the same period a year ago. Revenue rose 7 percent to euro18.8 billion ($22.5 billion).
Siemens shares fell 2.2 percent to euro64.68 ($77.55) in Frankfurt trading.
The Munich-based engineering company said its phone unit lost euro236 million ($282.96 million). The loss appeared on the profit and loss account under results from discontinued operations of its mobile phone unit. Meeting in Taiwan earlier Thursday, BenQ shareholders approved its takeover of Siemens' mobile phone unit.
Under the deal with Siemens, the Taiwanese consumer electronics firm pays no cash for the division. Siemens will actually pay BenQ euro250 million ($301 million) to take over the unit and will help BenQ develop and market patents.
Siemens will also buy BenQ's global depositary receipts - or shares sold around the world - for euro50 million ($61.4 million) when they're issued later this year.
The move will give the German company a stake of about 2.5 percent in BenQ.
BenQ will use the Siemens brand for up to five years while the German company will keep hold of its cordless phone business.
Despite the deal, Siemens warned that the phone unit's losses would continue to weigh on the company's overall results in the next quarter.
Chief Executive Klaus Kleinfeld also warned that improvement was needed in the company's other units and did not rule out job cuts.
"The performance at Siemens Business Services, Communications and Logistics and Assembly Systems is disappointing," he said. "Hence we are in the process of taking appropriate measures."
Siemens Business Services, the company's information-technology unit, saw its loss widen to euro109 million ($130.69 million) from euro2 million. The two other units slipped into the red, with Communications posting a loss of euro70 million ($83.93 million) and Logistics and Assembly Systems, or L&A, posting a euro49 million ($58.75 million) loss.
Siemens said it had started a strategic reorganization the L&A unit, but didn't elaborate. It also said it would outsource all product-related businesses at its SBS unit, while shifting management responsibilities at the communications unit.
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On the Net:
http://www.siemens.com
Source: Associated Press/AP Online
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