Falling handset sales hit Siemens’ bottom line

24 Jul 2003

German equipment manufacturer Siemens [NYSE: SI] has reported a decline in profit for the three months to 30 June as a result of falling demand for both handsets and other key products, and currency translation effects. Net income dipped to EUR632 million (USD726 million) from EUR725 million for the corresponding period of 2002, with Group operating profit falling from EUR1.098 billion to EUR1.023 billion. Sales declined by 15% to EUR17.38 billion while, perhaps more worryingly, the company’s order book dropped by around 10% to EUR17.21 billion. Although consumer demand for its products appeared to flatline, the company is upbeat about its prospects for the rest of the current fiscal year. Chief executive Heinrich von Pierer said, ‘While the absence of demand growth in key markets, combined with significant currency translation effects, lowered sales and orders year-over-year, the trend is more gradual on a consecutive-quarter basis. It is more satisfying that most of our groups were able to move further toward their target earning ranges for fiscal 2003’. He went on to say he expected a ‘similar positive performance’ for the fourth quarter. Despite von Pierer’s bullish stance, Siemens’ Information & Communications Networks (ICN) division – its single biggest revenue contributor – reported losses of EUR125 million, including EUR72 million in charges primarily at Efficient Networks. Siemens announced that the CEO will take charge of the underperforming unit from September.