Despite a huge leap in full-year net income, German electronics and engineering group Siemens Thursday reported a drop in fourth-quarter earnings due to charges from its transportation and mobile communications divisions.
Despite a huge leap in full-year net income, German electronics and engineering group Siemens Thursday reported a drop in fourth-quarter earnings due to charges from its transportation and mobile communications divisions.
Net income in the group’s fiscal fourth quarter dropped to €654 million ($806 million as of Sept. 30, the last day in the period being reported) from €724 million in the same period the year before, the Munich manufacturer said.
Fourth-quarter revenue rose 5% to €20.8 billion from €19.8 billion the year before.
In the past business year, Siemens CEO Heinrich von Pierer, who is moving over to the supervisory board in January, had to deal with design faults in a line of trains and software bugs in a new range of mobile phones that delayed deliveries to retailers. Von Pierer will hand over to Klaus Kleinfeld after being at the helm of Siemens for 12 years.
For fiscal 2004, Siemens saw net income rise 39% to €3.41 billion from €2.45 billion, resulting in an earnings per share of €3.82 compared to €2.75 a year earlier, Siemens said.
Over the past three years, von Pierer has put Siemens through a far-reaching reorganization that has included several acquisitions, more than 35,000 job cuts and, most recently, a merger of the group’s former fixed-line and mobile telecommunication units. The new communications group, launched in October, encompasses fixed networks, mobile networks and terminals.
Sales of mobile networking equipment to operators rose to €5 billion in fiscal 2004 from €4.3 billion in the previous year. Earnings from this equipment also increased to €396 million from €116 million.
But competitive pressures, which led to reduced average selling prices per unit, and a temporary halt in sales of the new series 65 phone due to a software glitch, had an overall negative impact on mobile phone sales. As a result, the mobile phone unit posted a loss of €152 million in 2004 compared with earnings of €27 million the year before.
Von Pierer, speaking at a webcast news conference, declined to comment on whether the group had plans to merge its mobile phone manufacturing operations with another company or even possibly divest the business altogether.
In the past fiscal year, Siemens increased mobile phone sales more than 30% to 51 million units, of which 12.7 million were sold in the fourth quarter alone.
Although the group’s IT service arm, Siemens Business Services, won several huge outsourcing contracts in the past fiscal year, including a 10-year contract worth €2.7 billion from the British Broadcasting Co. (BBC), the unit saw full-year revenue dip to €4.7 billion from €5.2 billion the year before, according to von Pierer.
At the end of September, the German company had 430,000 employees worldwide, of whom 164,000 were located in Germany. This figure represents a year-on-year increase of 13,000, attributed primarily to the first-time consolidation of employees at two manufacturers acquired in the U.S. Excluding these consolidations, the number of employees declined by 4,000 in Germany and increased by 6,000 outside the country.
Looking ahead to 2005, von Pierer said Siemens expects sales growth to “remain in the single-digit percentage range but will be stronger than (in fiscal 2004).”
