Siemens taps U.S. stock market

The day after the German-based company starts trading on the New York Stock Exchange, it announces that its semiconductor unit will slow its growth this year.

3 min read
German networking giant Siemens lumbered then stumbled into the U.S. securities markets.

The company said on Tuesday that its semiconductor unit, Infineon Technologies, will slow the company's growth this year. The news came just a day after Siemens started trading on the New York Stock Exchange.

In December, the electronics giant said that it expected double-digit growth in sales and orders for fiscal year 2001, which ends Sept. 30, and forecasted earnings growth to exceed sales growth.

The company says now it still expects the same growth, but only if Infineon is excluded from the mix. Siemens sees slower sales in its mobile phone business, but expects its power plant equipment division to do well.

The warning is "a reflection of the fact that it's a very tough market outlook for all kinds of capital equipment," said Chris Heminway, an analyst at Lehman Brothers in London.

In addition to chips, handsets and power equipment, Siemens makes capital equipment for the telecommunications, medical, industrial and transportation markets.

At least one analyst thinks the company's size is in some ways a liability.

"Siemens can only maximize shareholder value and proactively respond to changing market conditions by separating the telecom equipment and engineering businesses, even if it means losing some synergies," wrote J.P. Morgan Analyst Swantje Conrad in a report published on March 1.

She said the consolidation trend in the telecommunications-equipment and industrial-automation sectors will result in merger activity, and Siemens "in its current conglomerate structure, is not well positioned to participate in such a process in a proactive manner."

On the other hand, Swantje expressed confidence in the company's management and mentioned that its bosses have mostly delivered on what they have promised investors so far.

The company picked a convenient time to caution investors about a slowdown. Mobile phone maker Ericsson said Monday that first-quarter sales would be flat or slightly below last year's figures, and handset sales would be considerably lower than the year-ago first quarter.

On the chip side, Intel warned last week of slower worldwide sales and announced plans to cut 6 percent of its work force over the next nine months.

Despite the rough welcome, Siemens is in the United States to stay and announced Monday its intention to throw its considerable weight around the U.S. market, which has become an increasing share of the company's overall business.

Siemens has not ducked opportunities to acquire U.S. properties. The company has forked over about $8 billion since 1998 in acquisitions, including the purchase of Westinghouse's power business, Unisphere Networks, and the company's play for Efficient Networks.

Other U.S. plans include the public offering of its majority-owned subsidiary Unisphere Networks, which makes routers and software that manage DSL (digital subscriber line), cable, and wireless Internet connections for business and residential consumers.

"The listing of Siemens shares...is the logical consequence of the company's globalization drive," company CEO Heinrich V. Pierer said in a statement. "Listing here also gives Siemens an additional currency for potential acquisitions and strategic investments."

As of Monday's announcement, the company can be traded as a Level 2 American Depository Receipt (ADR). An ADR is a certificate that shows ownership of a certain number of shares in a foreign corporation and entitles the owner to all capital gains and dividends from the foreign company.

Level two ADRs require more transparent reporting of financial performance from the foreign company and give the company more leeway to make acquisitions.

The change gives Siemens leverage in the United States where it has increased its presence over the last few years.

Siemens generated $16.2 billion in U.S. sales in fiscal year 2000--including Infineon--up 42 percent over the previous year. For the year, Asia accounted for 13 percent of the Siemens' business; the U.S. market comprised 22 percent; Germany contributed 24 percent, and all of Europe except Germany topped all areas with 31 percent.

For the entire year, Seimens generated $70.9 billion (77.5 billion euros) in sales.

Heminway also said the company rejuvenated its desire for profit and growth after having a rocky performance in the early 1990s when the German economy showed slower growth.