Siemens plans to reduce the headcount of its loss-making IT services unit in what could be the first of several turn-around measures.

"We have overcapacity in certain areas, particularly product-related services such as hardware maintenance and software support," said Siemens spokesman Peter Gottal. "We simply don't have enough orders, particularly in Germany."

Commenting on a claim made by the labor union IG Metall earlier this week that Siemens Business Services (SBS) planned to axe 1,000 jobs, Gottal said he could not confirm whether "the number is right or wrong" because no final decision has been reached.

"Rumors always surface when we are forced to take action in an area that requires changes, as is the case with SBS, which isn't as profitable as we would like to see," Gottal said.

The unit posted a fourth-quarter loss of €25 million ($34 million), compared to a profit of €44 million in the same period a year earlier.

Last month, the German business publication Manager Magazin, citing sources close to SBS, said Siemens is mulling the breakup of its IT services unit. The plan calls for Siemens to take over the unit's software operations, for its hardware business to go to Fujitsu Siemens (in which Siemens has a 50% stake) and for its outsourcing activities to be sold off.

Adrian von Hammerstein, chief executive officer of SBS, declined to comment on a possible break-up. "I'm not giving any interviews to the press at this event," said Von Hammerstein on the sidelines of the Strategic IT Management Conference in Bonn on Wednesday.

Even though SBS has slipped into the red, the unit is involved in several big and prestigious IT projects, including Germany's advanced toll truck system. It is also a member of the TIS consortium that has submitted a bid to modernize the communications infrastructure of Germany's armed forces, the Bundeswehr. The consortium includes Deutsche Telekom AG and IBM.

In his speech to CIOs attending the Strategic IT Management conference, Von Hammerstein noted that SBS has played a key role in reducing IT costs within the Siemens Group through its relatively new shared services initiative. Several processes, including accounting and finance, sourcing and logistics, human resources and IT, are currently supported by the initiative.

The IDG News Service is a Network World affiliate.