Nokia Siemens buys Motorola Networks

Associated Press

 

Nokia Siemens Networks will acquire the majority of Motorola's wireless operations for $1.2 billion in a major thrust to gain a stronger foothold worldwide, the company said Monday.

The Finland-based company said the deal is "expected to significantly strengthen Nokia Siemens Networks' presence globally, particularly in the United States and Japan."

Nokia Siemens said it will "gain incumbent relationships with more than 50 operators," including top American wireless carriers and cable companies, including Verizon Wireless and Sprint Nextel Corp. It will also improve its position with China Mobile, Clearwire, KDDI, Sprint and Vodafone.

Nokia Siemens Networks - a joint venture between Finland's Nokia Corp. and Siemens AG of Germany - has seen dwindling profits in recent years, worsened by the global economic downturn.

The new contract, expected to be completed by year-end, would improve profitability and "have significant upside potential," Nokia Siemens said.

The deal is a step in the process of breaking up Schaumburg, Ill.-based Motorola. The company has planned for years to spin off the cell phone division, but steep losses in the unit have forced it to postpone the move. It's now scheduled for the first quarter of next year.

The handset division, to be called Motorola Mobility, will take with it the division that makes cable set-top boxes.

That will leave Motorola Solutions, the remainder, focused on government and corporate clients, with products like police radios and bar-code scanners. It's also keeping one part of its wireless network portfolio: the division that makes iDEN equipment, used in the Nextel part of Sprint Nextel Corp.'s network. Motorola invented that technology and is the dominant supplier of equipment.

Its push-to-talk feature is appreciated by dispatchers and work crews, but has been overshadowed in the mainstream by other technologies that provide broadband data speeds.

Nokia Siemens CEO Rajeev Suri described the deal as an "exciting acquisition ... with significant benefits for customers, employees and our shareholders."

"Motorola's current customers will continue to get world-class support for their installed base and a clear path for transitioning to next generation technologies while employees will join an industry leader with global scale and reach," Suri said.

Parent company Nokia shares were trading up 1.4 percent at euro6.86 ($8.92) in afternoon trading in Helsinki.

Siemens Confessing to Bribes Proves Blessing to Shareholders in CFO's View

Bloomberg 

 

Joe Kaeser was six months into his new job as chief financial officer of Siemens AG in November 2006, and already, he had a list of accomplishments to show for it.

The executive had helped to arrange a joint venture between Siemens and Nokia Oyj that combined their telecommunications- network units, guided Siemens in completing its largest U.S. bond offering and converted the company’s financial statements to international standards.

What Kaeser, 52, a Siemens employee for his whole working life, didn’t know was that he was about to face his toughest challenge yet, Bloomberg Markets reports in its May 2010 issue. On Nov. 15, 2006, police raided Munich-based Siemens’s corporate offices as part of a probe into alleged bribery and kickbacks that would eventually spread to 12 countries. Chief Executive Officer Klaus Kleinfeld stepped down in 2007 after the company’s board indicated it wouldn’t renew his contract. He wasn’t charged with wrongdoing.

Siemens, a manufacturing bellwether whose products range from power turbines to medical scanners and whose operations span the globe, ended up pleading guilty to violating provisions of the U.S. Foreign Corrupt Practices Act and paying $1.6 billion in fines to U.S. and German regulators.

‘Dark Chapter’

Kaeser was never charged with wrongdoing. As a member of Siemens’s management, he was initially under suspicion, he says. After an independent investigation conducted on behalf of the Siemens audit committee found he had no involvement in the scheme, he was able to help review and fix the company’s books going back to 1999.

“That was quite a rough time,” Kaeser said in a Feb. 9 interview at the company’s New York office.

“It was a very dark chapter of Siemens history,” he says. “Looking back now, I probably would feel compelled to say it was a blessing for Siemens that it got caught then and that this company had the opportunity and the chance to turn everything around and close that one for good.”

Shareholders approved a settlement between the company and nine former executives in connection with the probe in January. Under the deal, the executives, including former CEO Kleinfeld, would pay the company damages for failing to halt a culture of using bribes in order to win contracts, largely ending the ordeal for Siemens. Two former managers are scheduled to stand trial in a Munich court next week over allegations of breach of trust and aiding bribery.

Kaeser’s challenge now is to bolster profits at the company as the global economy recovers from the worst recession since the Great Depression.

Revamp Under Loescher

Bavarian-born Kaeser, who joined Siemens in 1980 in the company’s components group, works closely with CEO Peter Loescher, a former Merck & Co. manager who became the first outsider to head Siemens when he was hired in 2007 following Kleinfeld’s departure. Loescher, 52, changed Siemens’s structure to focus on three main divisions -- industrial, health care and energy -- and replaced half of the company’s top 100 executives.

The restructuring reduced costs, enabling the company to increase so-called sector profit, or pretax operating earnings, at the three units in fiscal 2009, although revenue and orders fell amid the downturn. “That actually would suggest that the moment our business recovers and grows, we will get a lot of incremental margin dropping to the bottom line,” Kaeser says.

Siemens’ shares have benefited as the cost-cutting moves helped to bolster profits. The company’s stock climbed 71 percent in the 12 months ended April 7 to 75.06 euros, outpacing the 44 percent gain in Germany’s DAX index in the same period.

Signs of Recovery

Kaeser says he’s uncertain about when a sustained recovery will take place, particularly in manufacturing. “There are signs of hope, but there is no consistent picture of what the industrial world will do going forward,” he says.

Siemens executives were similarly cautious even after announcing that profits exceeded analysts’ expectations for the first three months of fiscal 2010. The company affirmed its guidance for sector profit from the three main divisions of 6 billion euros ($8.2 billion) to 6.5 billion euros for the full fiscal year, which will end on Sept. 30.

Kaeser said in February that Siemens may revise its profit targets when it releases results for the second quarter, at which time the outlook for the company’s industrial businesses may be clearer. He says Siemens expected to learn more about customer demand at the Hannover Messe, an international trade fair being held in Hanover, Germany, from April 19-23.

“We do expect that we’ll get a lot of insight on what our important customers are going to do, are going to intend in the next 12 to 18 months,” Kaeser says. Siemens will announce its earnings for the March quarter on April 29.

Return to Growth

Even if demand picks up this year, Kaeser says it’s unlikely that revenue will return to pre-recession levels anytime soon. “Our viewpoint of our global business is that it takes years until we are back up at levels of 2008, where we came from -- probably 2011, if not 2012,” he says.

When growth does resume, Kaeser says, the geographical mix will be different, driven by demand from China, India and Brazil rather than Europe and the U.S., as in the past. Siemens is addressing this changing reality by reviewing its operations and workforce.

In January, Siemens announced about 2,000 job cuts in Germany, where it started its business 163 years ago.

“This is in the industrial area, drive technologies as well as industrial solutions, where we know that it ain’t coming back,” Kaeser says. “And if it comes back, it’s going to be in India or China.”

More Cuts

Siemens in March said it would eliminate an additional 4,200 positions at its SIS computer-services division. The reductions come on top of more than 20,000 job cuts last year, which trimmed the company’s global head count to about 402,000. A third of that total is in Germany.

Kaeser says Loescher’s changes in 2007 helped the company weather the downturn but that long-held policies also played a part. These include never using short-term financing to fund long-term assets, a strategy that shielded the company when money markets froze in 2008. Most of its 15.8 billion euros of long-term debt matures in 2014 and beyond, according to data compiled by Bloomberg.

“We’ve always been extremely stable and rigid on that matter, and it paid off massively,” Kaeser says.

Euro Zone

Siemens has no bonds due this year. In 2011, two issues totaling 3.55 billion euros will mature, according to Bloomberg data.

Kaeser also credits European monetary union with helping to keep the region together during the financial crisis.

“I feel very positive about it because if you hadn’t had the euro in the last 18 to 24 months, it would have been a big challenge for European leaders to keep everyone together,” he says.

With credit markets now stable, Kaeser says the company may choose to refinance some debt this year while rates are low rather than risk a rise in borrowing costs in 2011. “I don’t want to be caught flat-footed a year from now with fiscal or monetary actions that negatively affect our company,” he says.

Siemens Posts Fourth-Quarter Loss

BBC News

Germany's Siemens has reported a fall in annual profits and says that the outlook for 2010 "remains challenging"

Earnings were hit by losses from its struggling network joint venture with Nokia. The unit cost the firm 1.6bn euros ($2.4bn; £1.45bn) in write-downs.

Siemens' full-year net profit tumbled 58% to 2.5bn euros. However, last year's earnings had been boosted by a one-off sale.

Siemens also said that sales and profit would fall next year.

Siemens chief executive Peter Loescher said: "To ensure the sustainable viability of businesses that have been particularly affected by the crisis we are continuing to rigorously implement all necessary measures."

The company - which makes trains, medical scanners and power generators with task management software - has been hit by the downturn with less demand for industrial goods.

On Wednesday, the company came to an agreement with six former directors over a bribery affair that rocked the firm in 2006.

The firm wants to draw a line under the affair, but two former executives have yet to settle.

Siemens Issues Ultimatum

Story from Bloomberg

Siemens AG gave ex-Chief Executive Officer Klaus Kleinfeld and other former managers until mid November to declare if they are willing to settle a bribery case or face legal action by Europe’s largest engineering company.

The targeted Siemens managers also include Kleinfeld’s predecessor, Heinrich von Pierer, as well as former management board members Heinz-Joachim Neubuerger, Uriel Sharef, Juergen Radomski, Johannes Feldmayer and Thomas Ganswindt, the Munich- based company said today. The managers are accused of failing to halt a bribery scandal that has plagued the company since 2006.

The company has had about 2.5 billion euros ($3.7 billion) in costs related to the bribery scandal for which it claims its former board members are partly responsible. Siemens was investigated in at least 12 nations, including the U.S., over allegations employees bribed clients to win contracts.

The company found 1.3 billion euros of “unclear payments” made from 2000 to 2006. Siemens settled last month with former board members Klaus Wucherer, Rudi Lamprecht, and Edward Krubasik, who each agreed to pay 500,000 euros.

Siemens’s supervisory board is seeking to have the former officials reimburse the company for alleged breaches of “organizational and supervisory duties” that led to the scandal. Kleinfeld, now CEO of Alcoa Inc., and Von Pierer, are being investigated for administrative offenses by Munich prosecutors. Both have denied wrongdoing.

Winfried Seibert, a lawyer for von Pierer, declined to comment because the negotiations are pending.

Von Pierer and Kleinfeld announced their resignations within a week of each other in April 2007 as the bribery scandal unfolded. Von Pierer was Siemens’s chief executive officer from 1992 until 2005 when he became chairman. Kleinfeld was at the company for about 18 years before he succeeded von Pierer.

Siemens Splits Up U.S. Units

Story from M.A. News

Nearly two years after announcing a broad corporate reorganization, Siemens today said it was bringing its U.S. automation business in line with that restructuring, merging its Alpharetta, GA-based Energy & Automation group with a number of other Siemens units in the United States to form a new company.

The new company, called Siemens Industry, Inc., will be led by President and Chief Executive Daryl D. Dulaney, 56, formerly president and CEO of Siemens Building Technologies, Inc. Dennis Sadlowski, who was president of Siemens Energy & Automation, has left the company, according to a Siemens spokesman.

Siemens Industry will consist of the former Siemens Energy & Automation as well as Siemens businesses in such areas as transportation and building technologies. Six divisions form the new company: Industry Solutions, Industry Automation, Drive Technologies, Building Technologies, Mobility, and Osram Sylvania. The unit will have roughly 33,000 employees, including about 10,000 from SE&A.

In November 2007, parent Siemens AG reorganized into three sectors: Industry, Energy, and Healthcare. The reorganization was announced by CEO Peter Loscher, who took over Siemens earlier that year as the company grappled with an embarrassing bribery scandal. The reorganization was designed, in part, to provide greater transparency and accountability as a reaction to that scandal, but Loscher said at the time that the change was also in response to “mega-trends” in demographics and climate change. An evaluation of Siemens’ capabilities showed, he said, that they cut across market lines, necessitating the three-sector structure.

Today’s action is the latest step in Siemens’ efforts to align its businesses around the world with the three-sector structure. Siemens said that it will now be able to offer its U.S. customers more integrated automation products as well as more “comprehensive industry-specific solutions.”

ARC Advisory Group analyst David Humphrey, who had not yet been briefed by Siemens on the reorganization, said in an interview that his initial reaction was that the change may provide Siemens with some advantages.

“They are pulling all of these companies under one roof and duplicating the global corporate structure in the U.S.,” said Humphrey, who is based in Germany. “I don’t think it is wrong. The U.S. is a special market and Siemens is still not the market leader in the U.S. They need a strong CEO who has some freedom to adapt products to American tastes.”

The reorganization, he said, “may help Siemens take one more step in the direction of being a truly global company.”

SE&A was formed in 1978 as Siemens-Allis and was jointly owned by Siemens AG and Allis-Chalmers of Milwaukee. Siemens-Allis sold standard electrical equipment for utilities and other industrial companies. In 1983, Siemens-Allis acquired the low-voltage electrical products business of Gould, Inc. Two years later, Siemens purchased Allis-Chalmers’ remaining interest in the company and changed the name to Siemens Energy & Automation.