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. Last Updated: 07/27/2016

Siemens Set to Spin Off Billion-Dollar Businesses




FRANKFURT, Germany -- Siemens AG, the German electronics conglomerate that has struggled for years with mediocre profits, announced sweeping plans to sell off businesses with combined sales of more than $10 billion.


The move Wednesday marks by far the most radical, and in many ways the most desperate, attempt by the Siemens chairman, Heinrich von Pierer, to steer the global company back toward solid profitability.


In recent years, Siemens has come under intense criticism for sluggishness in restructuring to improve profits. While companies like Daimler-Benz and Veba AG have sold off or simply shut down marginal businesses, Siemens has remained timid about big changes.


Until now. Among other things, the Munich-based giant will spin off its loss-plagued semiconductor business, which was battered this year by plunging prices for memory chips and which lost about $727 million. It will also sell off businesses that make copper cable, electronic components and locomotives.


All told, the companies to be sold employ 60,000 out of Siemens' total work force of 416,000. Siemens also announced that it would set aside $2.4 billion in restructuring charges, atop $650 million it had announced earlier this year. Among other things, the company said it had set aside about $600 million for losses in Asia and other emerging markets.


Though company executives carefully avoided the issue of layoffs, most analysts believe the company intends to eliminate thousands of jobs beyond the ones tied to businesses to be sold.


At a news conference in Munich on Wednesday, von Pierer took issue with reports in German magazines that the company might shed 20,000 workers. But analysts said part of the big restructuring charges would almost certainly be used on severance payments.


Wednesday's disclosures capped weeks of increasingly fevered speculation about Siemens' plans and quickly lifted the company's stock to 114.35 marks a share, up 12.75 marks. In the United States, the company's American depositary receipts rose $6.50, to $68.50.


"This is a pretty major step back from the old belief that you have to have a huge, vertically integrated business,'' said Mark Davies Jones, an analyst at Salomon Smith Barney in London. "Until now, restructuring has been piecemeal, selling off parts of business units rather than the whole units.''


At the Munich news conference, von Pierer said the radical overhaul would set Siemens on a path toward higher profits.


Although von Pierer has pushed scores of reforms since he took over five years ago, the company continues to lag behind many of its competitors and frustrate its shareholders. None of the previous attempts at improvement came close to the sweep of those announced Wednesday.