Siemens Nixdorf Informationssysteme AG is finding the European marketplace tougher than ever and chief executive Gerhard Schulmeyer is desperate to break into the big North American market where the IT spend per employee is so much higher. The Paderborn, Germany-based computer manufacturer and IT services company, has reported net profits for the year to September 30 up 96% at DM57m while revenue grew 14% to DM 15.9bn. Schulmeyer was cautiously upbeat about the figures but he is acutely aware of the urgency with which he has to lift SNI’s revenues and margins. The 15% return on capital which Siemens AG has set its subsidiaries is the ever present specter at the feast, and Schulmeyer has no illusions about how tough this target will be to reach. SNI is currently running below average in profitability terms for the Siemens group. The company has spent heavily on internal restructuring over the last two years and, while Siemens will never disclose the figures, restructuring costs are set to rise even higher in the current period, pressurizing margins further. Conditions in Europe this year have been torrid for SNI with sluggish market growth and price erosion of around 20% the company said. Sales in SNI’s home market of Germany grew by only 8% in the year while in the rest of Europe sales grew by 21%; a commendable effort in a market estimated to have grown by just 7%. SNI says it now holds the number two slot in Europe for sales of PC Servers and the number three slot in Unix servers and PCs. But the sales mix is still a long way short of SNI’s widely publicized aim of generating one third of its revenues from outside of Europe. Non-European sales grew by a tenuous 1% to just 8% of the total, and penetrating the North American market, Schulmeyer admits, will be his company’s biggest challenge. Asked how he intended to achieve this goal, Schulmeyer became deliberately vague. He refused to fuel continuing speculation over whether SNI will be forced to team up with a heavyweight partner to speed up its geographical diversification. Forecasting for next year, Schulmeyer promised continuing double digit revenue growth but slower profit growth. He said that PC sales would be the engine driving the company forward. Over one million PCs were shipped for the first time this year and the aim is for 1.5 million this year. Asked if SNI were to emulate Apple’s latest move of providing build to order PCs over the internet, Schulmeyer became visibly agitated. He questioned why such an insignificant company seemed to be so good at communicating its intentions. Yes SNI did have a model for direct internet sales up and ready, but security issues were yet to be resolved. The company will not pay a dividend.
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