Siemens reports strong Q3; raises outlook

Siemens Thursday reported strong growth for its fiscal third quarter, citing positive performance from its automation and drive, power and lighting divisions, prompting the Munich company to predict that it would exceed prior earnings expectations for the year.

The German engineering conglomerate reported sales for the quarter of €18.2 billion ($22 billion as of June 30, last day of the period reported), up 5% from the €17.4 billion reported a year ago. Net income in the quarter jumped 29%, to €815 million, or €0.88 per diluted share, compared to €632 million, or €0.71 a share last year.

Net cash from operations and investments also increased during the period reported, to €279 million compared to €266 million a year ago.

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Siemens Thursday reported strong growth for its fiscal third quarter, citing positive performance from its automation and drive, power and lighting divisions, prompting the Munich company to predict that it would exceed prior earnings expectations for the year.

The German engineering conglomerate reported sales for the quarter of €18.2 billion ($22 billion as of June 30, last day of the period reported), up 5% from the €17.4 billion reported a year ago. Net income in the quarter jumped 29%, to €815 million, or €0.88 per diluted share, compared to €632 million, or €0.71 a share last year.

Net cash from operations and investments also increased during the period reported, to €279 million compared to €266 million a year ago.

Brisk sales in the automation and drive division, which reported a group profit increase of 52% for the quarter to €308 million led Siemens' strong performance, it said, as well as gains in the medical, lighting and power groups. The Transport Systems and Siemens Business Services (SBS) groups were the only units to report losses. SBS group sales declined 11% to €1.1 billion in the quarter, reflecting pricing pressures and a weak market for IT services, Siemens said.

The company's Information and Communication Mobile group also improved during the quarter, despite intense competition, posting a 13% sales rise overall to €2.4 billion, Siemens said. Its Mobile Networks unit reported earnings of €133 million on sales of €1.2 billion, compared to earnings of €36 million on sales of €968 million a year ago.

The Mobile Phones division generated €996 million from the sales of 10.4 million handsets, compared to sales of €922 million on a volume of 8.1 million handsets in its third quarter of 2003.

However, the company said that the average selling price of handsets declined year-over-year, contributing to a €88 million loss for the quarter. Siemens has been looking to grow its mobile business in recent quarters, although it lost market share in the first quarter of this year, according to Gartner, amid heightened competition and pricing pressures. The company came in fourth in terms of handset units shipped for the first quarter of this year, with its market share declining 1% to 8.4%, Gartner said.

Siemens' Information and Communication Networks held relatively steady in terms of sales compared to last year, at €1.68 billion, but orders declined by 8%, the company said. Sales in the Carrier Networks and Services business increased from €801 million last year to €816 million. The Enterprise Networks unit saw its sales slide from the previous year, however, to €859 million from €893 million.

Strong sales and order growth during its third quarter, particularly in June, prompted Siemens to raise its expectations for its full year, saying that it expects to outpace internal earnings projections, although it did not give specific figures.

Also Thursday, the company confirmed previously announced management changes, saying that its board approved the appointment of Klaus Kleinfeld as the deputy chairman to Siemens' Managing Board effective Aug. 1. A proposal will also be made at the upcoming annual shareholder meeting on Jan. 27 to elect Heinrich von Pierer to Siemens' Supervisory Board, succeeding Karl-Hermann Baumann. Kleinfeld will then take over as president and chief executive officer, the company said.

The IDG News Service is a Network World affiliate.