Siemens cuts IT jobs ahead of possible spinoff

FRANKFURT Thu Mar 18, 2010 12:52pm EDT

File picture shows people covered with umbrellas walking next to a Siemens building in Munich November 13, 2008. REUTERS/Michaela Rehle/File

File picture shows people covered with umbrellas walking next to a Siemens building in Munich November 13, 2008.

Credit: Reuters/Michaela Rehle/File

FRANKFURT (Reuters) - Siemens, Europe's biggest engineering conglomerate, unveiled plans on Thursday to slash 4,200 jobs at its information technology unit, helping to set it up for a possible spinoff.

Chief Financial Officer Joe Kaeser said the 4,200 job cuts at Siemens IT Solutions and Services (SIS) would be made by autumn 2011 and would include 2,000 jobs in Germany. SIS currently has about 35,000 employees, with nearly 10,000 in Germany.

He said Siemens would invest an additional amount of more than 500 million euros in SIS, which could include acquisitions to boost some of unit's businesses.

Kaeser also said Siemens would turn SIS into a legally independent business unit by October.

Transforming a business into an independent unit can be the first step in its disposal.

Kaeser said making SIS independent would give it more options, but when asked by reporters, he refused to give details or be pinned down on the timing of a decision on the future for SIS. He said only that the focus now was to make it attractive under a new business concept to expand its software solutions and re-train personnel.

Analyst Michael Busse of Landesbank Baden-Wuerttemberg (LBBW) said Siemens wants to get rid of SIS.

"SIS is too big to be a niche player and too small to be a global player. It is stuck in the middle. It only had an operating margin of around 2 percent last year. It is clearly the weakest spot within Siemens," Busse said.

"(CFO Joe) Kaeser said in January they want to put it on IPO or a sale by 2012."

SIS has had falling sales in recent years. Revenue in 2009 fell 12 percent to 4.7 billion euros and new orders were off by 15 percent while operating profit fell by 38 percent to 90 million euros.

NO MORE CHANGES

Siemens head of personnel Siegfried Russwurm told reporters there were no plans for any more structural changes in the Siemens group.

The conglomerate, a bellwether of Germany's economy for the wide-ranging products it makes, has been undergoing huge restructuring to help it to cope with the harsh impact of the global economic crisis.

The group said it expected to book 400 million to 500 million euros in restructuring charges for 2010.

German engineering association VMDA has said it expected stagnant production output in the sector in 2010 after it declined by nearly a quarter last year.

Siemens completed a two-year global program in 2009 to trim about 17,000 jobs in administration and sales across the entire group.

It had warned late last year it would make more reductions in headcount at some divisions to offset the impact of the global crisis but would not make any more company-wide cuts.

It then announced in January it would cut nearly 2,000 jobs in Germany in its bread-and-butter Industry Sector.

Munich-based Siemens, which employs more than 400,000 people worldwide, including around 128,000 in Germany, has targeted total group operating profit in fiscal 2010 to drop to 6.0 billion to 6.5 billion euros ($8.20-8.88 billion) from 7.46 billion the previous year.

Siemens shares were down 0.22 percent at 71.68 euros at 12:18 p.m. EST, in line with the blue chip index.

(Editing by Karen Foster)

($1 = 0.7321 euro)

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