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July 5, 1993

LOSSES AT SIEMENS NIXDORF TO BE AS BIG AS LAST YEAR AS SIEMENS AG FALTERS

By CBR Staff Writer

It seems that companies like Siemens AG are too close to the action to get a clear picture of what is happening in the German real economy, and it was only yesterday that the company admitted that its forecast for the fiscal year to September 30 may be too optimistic. The company was on show in Copenhagen yesterday and acknowledged that while it had been shooting for unchanged group net profit for the year, it might have to revise down the forecast during the final quarter of the business year. According to Reuter, management board chairman Heinrich von Pierer said profit for the full year would now depend on performance in the final quarter. An unpredictable development could still force us to correct our predictions, he said. The company added that the strength of the mark against other European currencies would hit results this year, noting that it had already pushed down group sales and incoming orders by 2%. Siemens had said that the strong mark against the dollar pushed down its earnings in the previous year. Von Pierer said higher financial earnings and lower tax payment for its now chronically loss-making Siemens Nixdorf Informationssysteme AG would offset lower operating profit. Every pronouncement on Siemens Nixdorf is worse than the last, and the company now says that losses this fiscal at the computer company are unlikely to be any lower than they were last year. The company confirmed analysts’ fears that losses at Siemens Nixdorf would stand little changed at $300m due to price pressures and unfavourable foreign exchange rates. It will take some time before it swings into profit…(although) it should not take more than three years, von Pierer said.

Restructuring

But losses from the semiconductor business would decline in the current year as a result of its restructuring and higher demand. The company also says it will have cut its group workforce by 16,000 by the end of the current fiscal, bringing the total to around 400,000, and that it aims to cut its costs by 20% to 30% over the next two or three years: comprehensive measures in the company’s production and administration would lead to a saving of tens of millions of dollars next fiscal year. Further substantial job cuts are planned for next year, including further reductions at Siemens Nixdorf of another 4,500 next year from a staff of 44,000 expected by September 30. Siemens has revised downwards its 1992-93 forecast for group sales to about $47,700m from an earlier forecast of $49,470m, and of incoming orders to $49,470m from $51,240m. During the first eight months of this year, Siemens group sales inched up 2% to $28,680m but incoming orders fell 6% to $31,450m. Growth in our infrastructure divisions has stabilised at a high level. Thus we feel the effects of other divisions hit by the weakness in the economy, von Pierer said. Siemens is aiming to treble its business in South East Asia by 1995-96 as the region’s gross domestic product was expected to show an annual growth of 8% to 10% through to the end of this century. The company’s incoming orders in the region would rise to more than $3,500m or 8% of the group’s total orders this year, compared with $2,060m or 4% last year. Growth of the public telecommunication business stabilised, the company noted. The shares only twitched on the forecasts.

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