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Business

Siemens Plans Rigorous Restructuring of ICN Unit

The technology giant will implement stringent restructuring measures to return its biggest business division, Information and Communication Networks, to profit as soon as possible.

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Siemens has become a respected household brand name but its business division could do better

Technology giant Siemens AG plans to implement rigorous restructuring measures to return its biggest business division, Information and Communication Networks (ICN), to profit as soon as possible. Thomas Ganswindt, the new chairman of the division, said the aim was to make the business "lastingly profitable".

Depending on market developments, further job cuts could not be ruled out, he added.Ganswindt took over at the helm of ICN in September and has already presented a far-reaching restructuring program. Under the plans, around 10,000 jobs are to go in the networks division alone, with around 20 productions site worldwide to be closed.

Ganswindt said that in the current 2001/02 business year ending Sept. 30, savings of around 2 billion euros are to be generated. But reductions in personnel costs would only account for a small share of this total. The lion's share of savings is to be generated with improvement in processes, including pushing down the prices of ICN's suppliers.

In the area of networks, Siemens is facing pressure from two sides. On the one hand, global telecommunications markets have collapsed drastically in recent times. The major telecoms groups are holding back with their networks investments, thus weighing on the sector as a whole.

At the same time, Siemens has internal problems. It lagged behind in the fast-growing data communications business and is paying the price for having to play catch-up. But Ganswindt pointed out that the current market crisis was actually helping Siemens to do so.

In the 2000/01 business year, ICN lifted sales 14% to 12.9 billion euros but booked a loss of 861 million euros. In the previous year, it still made a profit of 686 million euros. Ganswindt, who previously turned round Siemens' transport-technology division, stressed that it was the group's goal to become the number one in convergence business, i.e. in bringing together voice and data communication, as well as in broadband communication.

In the area of Internet routers, Siemens subsidiary Unisphere Networks is already the world's number two behind Cisco, albeit by a substantial margin. Siemens semiconductor subsidiary Infineon on Thursday also announced that it might have to make further job cuts. Chairman Ulrich Schumacher said that the volume of mobile phone sales over the Christmas period would be a decisive factor. The company is currently cutting 5,000 jobs.