Like most other cell phone makers, Siemens is hurting from three years of slowing worldwide cell phone sales and shrinking corporate spending on information technology. The Siemens unit that's devoted to making equipment for cell phone networks continues to suffer as well, as carriers cancel plans to build newer networks.
Siemens said its Information and Communication Mobile Group will cut 8 percent of its work force in an effort to offset lingering weakness in the mobile telecommunications market. The division also plans to slash nearly $1.2 billion in costs through September 2004, the company said. Siemens mobile includes cell phones, infrastructure and applications software.
"The world market for mobile communication networks already declined by 15 percent last year. This year, the market will contract by up to 20 percent," said Rudi Lamprecht, head of Siemens' mobile communications group, in a statement.
While mobile phone shipments are, prices are under pressure because of growing competition, according to a recent Gartner report. Lamprecht agrees.
"Sales in the mobile phone market are stagnating, in spite of higher volumes," Lamprecht said. "Business at all layers is under considerable pressure on (profit) margins."
In the quarter ended June 30, the mobile unit posted a 14 percent year-over-year decline in sales and a 2 percent drop in orders, based on figures adjusted for fluctuations in currency. Although the unit posted a profit, a number of one-time gains played a contributing role.