Siemens Unveils Sweeping Restructuring

Siemens AG has launched a broad restructuring program to shed underperforming business and slash costs by €6 billion over the next two years.

Siemens says the savings will come from a vaguely defined mix of internal streamlining, quality and productivity gains, supply-chain costs reductions and an unspecified number of job losses.

Company officials admit some problems stem from misguided acquisitions made in an effort to boost revenue by more than one-quarter from 2010 to an eventual €100 billion. Last month Siemens put its money-losing solar power unit up for sale and also plans to divest its water-treatment business.

The company plans to bolster operations with strategic acquisitions, including a new deal to acquire Belgium's LMS International, a maker of product life-cycle management software, for €680 million.

Siemens unveiled the restructuring as it reported that net profit slid to €4.5 billion in the fiscal year ended Sept. 30 from €6.2 billion a year earlier. The company incurred €1.2 billion in one-time costs, about half of them at its energy unit. Revenue rose 7% to €78.3 billion, but new orders dropped 10% to €76.9 billion.

Operating profit as a percentage of sales shrank to 9.5% from 12.8% the previous year. The restructuring aims to boost operating returns to at least 12% by 2014.

Siemens predicts that revenue may decline in the current fiscal year, and profit could fall as low as €4.5 billion, including about a €1 billion restructuring charge.