Siemens Merges Software/IT Operations, Continues Revamp"

BERLIN -(Dow Jones)- Siemens says that it will fold its software development businesses into its loss-making information-technology services unit, as part of its ongoing turnaround effort - aimeding to make the business profitable by spring 2007.

The Munich-based engineering and technology conglomerate has long been considering different options for the structurally money-losing IT services unit Siemens Business Services, or SBS, including divesting or dissolving it.

But in an apparent pledge to maintain the business, Siemens Chief Executive Klaus Kleinfeld Thursday said in a statement, "IT know-how is a key to Siemens' success."

In June, people familiar with the matter had told Dow Jones Newswires that other firms, including domestic rival Deutsche Telekom, French-Dutch Atos Origin and US-based IBM, Hewlett-Packard and Computer Sciences had expressed interest in taking over parts or all of SBS.

Since taking the helm at Siemens in early 2005, Kleinfeld has battled to improve profit at a company whose products range from high-speed trains and medical scanners to wind turbines and lighting for airport runways.

At 0943 GMT, shares in Siemens were up EUR0.39, or 0.6%, at EUR67.30.

Siemens said the merged operations will generate annual sales of EUR5 billion and have about 43,000 employees, as it folds in its software development businesses in India and Austria, Greece and Switzerland. It will rename the business into Siemens IT solutions and Services, or SIS, from its current name, Siemens Business Services, or SBS.

"SIS will enable us to serve both our external customers and Siemens units even better," Kleinfeld said. The company added that Siemens' internal IT systems will be integrated with the group, "which will make its businesses more cash flow and profit-oriented overall."

The company said that revamp should be concluded by January 2007.

Siemens said it will continue its earlier announced turnaround efforts of the IT services business, including the aim to cut EUR1.5 billion in costs by spring 2007. But the company added that it is still in talks with employee representatives and the labor union IG Metall to achieve these targeted cost savings.

Siemens, Europe's largest engineering and technology company by sales, targets an operating profit margin for its IT services unit of 5% to 6%, to be achieved by spring 2007. SBS posted an operating loss of EUR99 million in its fiscal third quarter, which ended on June 30.

Analyst Frank Rothauge of Frankfurt-based bank Sal. Oppenheim said that it remains to be seen how this new plan by Siemens will play out for its IT services unit, while he also said that he isn't convinced whether Siemens can actually achieve the targeted cost savings. Rothauge has a buy rating on Siemens.

Siemens had already folded the hardware services part of SBS, which provides maintenance services including computer repairs and help desk operations, into its IT joint venture Fujitsu Siemens Computers, which it jointly owns with Japanese technology company Fujitsu.

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

-By Joon Knapen, Dow Jones Newswires; +49-30-28884127; joon.knapen@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 12th October 2006