Siemens to sharpen its game with $7.7 billion of savings

Thu Nov 8, 2012 7:07am EST
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By Maria Sheahan

BERLIN (Reuters) - Engineering conglomerate Siemens AG aims to save 6 billion euros ($7.7 billion) over the next two years as it fights to stay competitive in a weak global economy.

Siemens, Germany's most valuable company which makes products ranging from fast trains and gas turbines to hearing aids, has come under pressure to cut costs and focus on its most profitable businesses to close a gap with rivals such as ABB or General Electric.

"We know what we have to do, and we're doing it," Chief Executive Peter Loescher said in a statement on Thursday as the industrial bellwether reported declining quarterly profit that was still slightly above analysts' forecasts.

The savings target was much higher than the 2-4 billion euros analysts had expected, sending Siemens' shares up 4 percent - one of the biggest gainers in Europe.

"We see the cost program (at Siemens) as meaningful and credible. This is much better than many had expected," Morgan Stanley analyst Ben Uglow said.

Analysts at Citi said Siemens' 2014 earnings per share could be at least 13 percent higher than was expected before the savings - a mixture of cost cuts and efficiency gains - were announced.

Loescher said some of the company's 410,000 jobs would go, but declined to say how many.

He aims to increase annual sales by about one third to 100 billion euros in a few years, but a faltering economy has pushed prices down and eroded margins with little prospect of a pick-up any time soon.   Continued...

The logo of Siemens AG company is pictured atop a factory in Berlin October 9, 2012. REUTERS/Fabrizio Bensch