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Business

Siemens Sees End to Earnings Decline

The technology giant said it expects 2002 to bring an improvement in earnings after suffering a profit collapse in 2001, but stressed that restructuring costs will weigh on its bottom line in the current quarter.

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Siemens going strong in 2002

Electronics and engineering giant Siemens AG on Thursday said it's expecting fiscal 2002 to bring an improvement in its earnings position after it suffered a profit collapse in fiscal 2001.

For its 2001 business year, which ended September 30, the group booked a profit after tax of 2.1 billion euro, representing a considerable decline from the 2000 full-year figure of 8.9 billion euro.

The reason for the new-found optimism is that the next few months are expected to bring improved business performances from those of the group's divisions that emerged as problem children in the last fiscal year.

For example, two divisions that now stand on the verge of profitability, according to von Pierer, are Mobile Phones and Siemens Dematic, the logistics and production-automatization arm. In the final quarter of the 2001 business year, Mobile Phones narrowed its loss to 22 million euro, while Dematic's full-year loss came in at 60 million euro.

Admittedly, some divisions such as Telephones and Siemens Business Services (SBS), the IT service provider, are still a long way away from profitability. But SBS, which incurred a loss of 260 million euro last year, is now seeing its business model undergo a complete re-examination.

It, like Telephones, is expected to meet the group's profitability target by 2004. Finally, the Networks division is currently undergoing restructuring.

And Siemens' all-important U.S. business booked a loss of over 600 million euro last year, but this year's result will be better, Chairman Heinrich von Pierer promised.

The Siemens chief left open whether the improvement will start to show in the figures for the current quarter, the first in its 2002 business year.

He said restructuring costs in the problems divisions would still weigh on the results, though they would come out lower than similar charges taken in the final quarter of fiscal 2001. Von Pierer did not put a figure on the extent of the profit growth the group as a whole expects for 2002.

But the group's announcement was enough to push the Siemens share price up 4.5%, though it fell back soon after. It closed up nearly 1% on Thursday.

On Wednesday, the share price had already undergone an energetic leap of 10% on the news that the group has de-consolidated its chip unit, Infineon by taking its stake below 50%.

The news of the Infineon de-consolidation met with a positive reception from analysts. Dresdner Kleinwort Wasserstein, for example, issued a buy recommendation in respect of the Siemens share and raised the share-price target to 85 euro from 70 euro.

Chief Finance Officer Heinz-Joachim Neubürger did not disclose the size of Siemens' current stake in Infineon. He said the group had been making sales over the past few weeks because a favorable price had been available and the demand had been there.

Siemens remains Infineon's major shareholder, but it plans to effect a complete withdrawal. Von Pierer on Thursday promised that Siemens would do nothing to hurt the interests of Infineon shareholders.