German technology giant Siemens Wednesday announced a tumble in profits for its second quarter and said it was looking for a partner for its beleaguered mobile phone unit.
Siemens' mobile unit has been a source of concern for years
New Siemens Chief Executive, Klaus Kleinfeld -- who took up his post just one hundred days ago -- bore the bad tidings at his first major international presentation in the Portuguese capital, Lisbon.
In a speech, Kleinfeld said "for fiscal 2005 as a whole we thought we could achieve -- under certain conditions -- another slight rise in earnings. Today, this is difficult to assess."
Net income in the company's second fiscal quarter dropped to 781 million euros ($1 billion) from 1.2 billion euros at the same time last year, when Siemens made generous profits following the sale of a stake in former chip unit Infineon Technologies AG.
Siemens problems lie squarely with its telecommunications unit. Although it is the world's fifth largest hand-set manufacturer, high labor and site costs make it hard for the German giant to compete with fast-expanding, flexible Asian producers.
After the fourth consecutive quarterly loss in the mobile phone unit, Kleinfeld is planning to remove the thorn in Siemens side by reorganizing the branch as a separate business.
The company's new helmsman made it clear there were neither plans to sell nor scrap Siemens' loss-making black sheep. He said he was positive that there is a solution to be found, "a solution which includes a partner or a string of partners."
There is much speculation about the most likely candidates to join forces with Siemens. At the weekend, Germany's Frankfurter Allgemeine Zeitung newspaper reported that US cell phone manufacturer, Motorola Inc, is in advanced talks on a possible partnership with the German company. It said the US company was eager to use such a deal to secure better access to the European market.
Motorola is launching 16 new generation cell phones this year
But that particular rumor has surfaced again and again over the past three years, and analysts suggest that with Motorola Inc's continental sales already gathering momentum, teaming up with Siemens wouldn't make much sense.
The other big name in the rumor mill is Taiwanese electronic giant, Acer. On Sunday, the Süddeutsche Zeitung newspaper said that the two companies are currently in talks, but an Acer spokesperson said on Monday that there had not been any contact between them.