* Siemens CEO to present strategy 9 months into top job
* Investors fear Alstom bid could derail profit drive
* Culture clash, competition issues cloud Siemens-Alstom
* Questions over whether Siemens really wants French rival
By Noah Barkin and Irene Preisinger
BERLIN, May 4 When Joe Kaeser took the reins of
German engineering giant Siemens last summer after a
boardroom coup, he made clear his priority was closing a yawning
profitability gap with rivals such as General Electric.
On Wednesday the 56-year-old Bavarian presents his grand
strategy, but it is likely to be overshadowed by something that
investors and even some Siemens executives fear could undermine
his profit drive: a politically-charged battle with the U.S.
group for France's Alstom.
Kaeser is expected to unveil a major streamlining of the
Munich-based company's structure involving thousands of job cuts
plus a series of smaller acquisitions and disposals.
Siemens announced last week that it would make a formal
offer for Alstom - most likely in the form of a swap of power
and rail assets - after being encouraged by the French and
German governments to step in. Hours later, Alstom's board chose
to accept a $16.9 billion GE bid for the French firm's energy
How Kaeser reacts - and the signals he sends about his true
interest in Alstom - will be as closely watched as the strategic
overhaul that he is to present at the firm's historic
Siemensstadt complex in Berlin.
Siemens already tried to snap up the energy assets of Alstom
- chiefly the manufacture of turbines for power stations and
electricity transmission equipment - when the French firm
required a state bailout a decade ago.
But Kaeser has yet to attempt a big deal since he replaced
Peter Loescher as chief executive following a string of profit
warnings. "It is his first major act, his first big
acquisition," said Christoph Niesel, a fund manager at Union
Investment. "If it goes wrong, he won't be able to blame his
predecessor anymore. He will be responsible."
Siemens shares have risen nearly 17 percent since Kaeser's
arrival. Earlier this year, they poked above
100 euros for the first time in six years, a sign of confidence
in the no-nonsense pragmatist and 34-year veteran of Siemens who
had previously been finance chief.
Hoping to keep the momentum going, Kaeser is expected to
unveil a leaner, flatter structure that will put an end to the
firm's four big divisions - industry, energy, healthcare and
In their place, according to German media, will come roughly
10 smaller divisions, including new ones focused on industrial
software and digital production processes. The change could
result in an additional 5,000 to 10,000 job cuts.
Kaeser, who changed his first name from Josef during a stint
in the United States, may also confirm the purchase of
Rolls-Royce's energy business for just under 1 billion
euros, and the sale of a majority stake in Austrian unit VAI
Metals Technologies to Japan's Mitsubishi Heavy Industries
For its fiscal second quarter, Siemens is expected to post a
27 percent increase in pre-tax profit to 1.7 billion euros on
Wednesday, with revenues flat at just over 18 billion.
But the focus will be on Alstom, a deal that would come with
big risks for Siemens. Kaeser first approached Alstom CEO
Patrick Kron about a deal in February when rumours surfaced that
GE was interested in the French firm, but got the brush-off.
Less than a year after Kron became CEO in 2003, Siemens
tried to thwart the state bailout of Alstom in the hope of
snapping up some of its best assets. Some executives worry how
the two bitter rivals could ever work harmoniously together.
There are also competition concerns, notably around the
proposed transfer of Siemens' rail assets to Alstom in exchange
for its energy business.
The French government has said this swap would create two
European champions, one supplying the energy industry and the
other making rail equipment including high-speed trains. But
authorities in Brussels could thwart the creation of a rail
group which commands two thirds of the European market.
Because of problems like these, some analysts suspect Kaeser
may have thrown his hat into the ring merely to bid up the price
for GE, and to avoid antagonising the French and German
governments, both big clients.
Kaeser has already infuriated some in the Berlin government
by meeting President Vladimir Putin at his residence near Moscow
in the midst of the Ukraine crisis.
German weekly Der Spiegel reported at the weekend that even
members of the Siemens board had deep doubts about a deal with
Alstom and were secretly hoping GE would emerge the winner.
"The world won't end for us if we don't get it," one board
member was quoted as saying. "The future of Siemens does not
depend on this."
On the contrary, some investors fear an Alstom deal would
turn into a major distraction. They say Siemens concentrate on
catching up with more profitable rivals such as GE and Philips
, paring back its vast, complex portfolio and getting a
grip on the costly delays that have plagued off-shore wind and
high-speed train projects.
Tim Albrecht, a fund manager at DWS Investment, said he
would prefer a low-risk strategy in which the company emphasises
organic growth over big acquisitions such as Alstom.
"We had hoped the company would focus on its profitable
businesses, sell off those with poor margins and use the
proceeds to give something back to shareholders, either through
a share buyback or dividend payout," he said.
($1 = 0.7212 Euros)
(Writing by Noah Barkin; editing by David Stamp)