Siemens 1Q Pft Up 38% But No Mobile Unit Fix

MUNICH (Dow Jones)--Siemens AG (SI) Thursday said first-quarter earnings jumped 38% as losses at its mobile phone and IT services units were offset by a one time gain on a share sale and surging profits at several of its other units.

However, Siemens failed to say what it will do with its ailing mobile phone unit, only indicating that it won't be closed down. Outgoing Chief Executive Heinrich von Pierer said the company has come up with a plan and that implementation will start soon.

Net profit at Germany's largest electronics and engineering company rose to EUR1.00 billion in the three months to Dec. 31, from EUR0.73 billion a year earlier, exceeding analysts' expectations of EUR0.86 billion.

Sales fell 1% to EUR18.2 billion while orders were up 5% at EUR21.5 billion. Analysts had predicted sales of EUR19.4 billion and orders of EUR21.3 billion.

The company said it is sticking to its forecast of sales growth in 2005 and said its entire focus will be on increasing net profit for the full-year.

"I'm very satisfied with the first quarter ... the earnings growth in operations is in line with our expectations, while revenue growth is typically slow in our first fiscal quarter," von Pierer said in a statement.

Siemens' posted "some solid first-quarter data, at some points better than expected," a Frankfurt-based trader said.

At 0819 GMT, Siemens shares were down 0.4% at EUR61.58.

After 12 years at the company, Von Pierer will Thursday hand over the reigns to Klaus Kleinfeld. In the past few years he has overseen a major restructuring, including 35,000 job cuts and the sale of non-core activities, as the company saw its markets weaken.

Recent speculation has centered on what Siemens will do with its loss making mobile phone unit. The unit posted a EUR143 million loss in the first quarter, from a EUR64 million profit a year earlier, while sales dipped 21% to EUR1.17 billion as unit volumes in the Christmas quarter slipped to 13.5 million from 15.2 million a year ago.

"There was a lot of speculation that we would a concrete solution for the mobile phone business ... 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 reorientation," von Pierer said in a written speech.

"We have set a schedule that we will work out quickly but without haste," he noted, adding that Siemens "must preserve" its "development team and excellent production facilities and the good name" in mobile phones.

The trader said it was disappointing the company hadn't presented concrete plans for the division, besides indicating that it won't shut it down.

In a note to investors, Nomura said Siemens' results were in line with expectations, but it confounded hopes that rapid action would be taken on the loss-making handset unit. "We think that keeping the mobile phone unit open in its current form will cost shareholders significant value." Nomura is maintaining its neutral recommendation on the stock.

Siemens' communications division, which includes the handset unit, posted a profit increase of 38%, helped by a EUR208 million gain on the sale of part of its stake in Juniper Networks Inc.

Siemens' IT unit, dubbed Siemens Business Services, slipped to a EUR25 million loss in the quarter, from a EUR44 million profit a year ago, due to "primarily an unfavorable revenue mix, and severance charges." Von Pierer said "there are fundamental changes in the market that require appropriate adjustments," without elaborating.

On the positive side, the transportation unit returned to a profit of EUR20 million, following a heavy loss in 2004 due to the recall of defective streetcars. The unit "has past its worst moments," von Pierer said.

Elsewhere in Siemens' sprawling empire, there were solid performances from the automation and drives, medical divisions, and power generation units.

Company Web site: http://www.siemens.com

-By Joon Knapen, Dow Jones Newswires; +49-69-29725509; joon.knapen@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 27th January 2005