Siemens cuts 7000 telecom jobs

Sarah Knight

FRANKFURT: Siemens AG said on Monday it planned to cut an additional 7,000

jobs from its loss-making telecom businesses, bringing the total number of jobs

shed across the group this year to around 15,000.

The German technology giant, which said earlier this year it planned a

sweeping reorganization of the Information and Communication Networks (ICN)

business, said it aimed to close half of the network unit's worldwide production

plants.

It said it would cut 5,000 jobs from the fixed networks business and an

additional 2,000 jobs from its mobile networks operation as part of a package of

measures aimed at achieving savings of at least two billion euros ($1.82

billion).

The job cuts, half of which will come in Germany, add to the tens of

thousands of jobs already lost worldwide in the telecoms sector in the face of a

severe drop in demand following boom years in 1999 and 2000.

The latest cuts bring the total at Siemens so far this year to about three

percent of its global workforce of more than 460,000 but represent some 14

percent of the workforce at its Information and Communications segment, which

groups its telecommunications and information technology businesses.

France's Alcatel is cutting 20 percent of its workforce, while in North

America Nortel Networks is cutting over 50 percent, Lucent more than 40 percent

and Cisco just over 30 percent.

"Whether these measures are enough depends on what the market

does," said Fabrice Farigoule, an analyst at Bankhaus Metzler in Frankfurt,

of Siemens' plans. "If it doesn't improve they may need to make further

cuts," he added.

Farigoule has a "sell" rating on the share and a price target of 45

euros.

NEXT UPSWING

At 1543 GMT, Siemens shares were trading 1.45 percent lower at 47.45 euros,

after rising as much as 1.7 percent, but still outperforming the blue-chip

German DAX, which was down 2.15 percent.

"It is what the (financial) community wants to hear but I don't think it

is the right strategy," said Boris Boehm, a fund manager at Nordinvest in

Hamburg.

"If you want to be prepared for the next upswing, keep your people and

try and reduce fixed costs... because qualified people are really scarce in the

(IT) industry."

Siemens said it would focus on lifting earnings at the ICN networks business

rather than looking to boost sales and at the same time aim to improve sales

channels and strengthen links with its main customers.

Thomas Ganswindt, who was appointed to head the restructuring of the unit

last month, said the measures would pave the way for the long term turnaround of

the business.

"I am convinced... we will succeed in resisting the general market

trends and make ICN a long-term earnings leader at Siemens once again," he

said in a statement.

Several analysts have said Siemens was slow to react to a downturn in demand

for telecoms equipment, as telecoms operators, who invested heavily in the

sector in 1999 and 2000, reduced spending at the end of last year to cut debt.

The latest job cuts add to a steadily mounting total at Siemens, which had

already said it was cutting 5,500 jobs from the ICN fixed networks division and

transferring an additional 2,000 staff to the mobile networks division.

In addition, it had cut 2,600 jobs from the mobile telecoms business and

announced 2,000 job losses at Siemens Business Services, its IT services arm.

Infineon Technologies, the group's semiconductor unit, has also announced

about 5,000 job cuts of its own.

Siemens fixed net and mobile telecoms divisions reported a combined loss of

over one billion euros in the third quarter to the end of June, weighed down by

790 million euros in restructuring costs.

(C) Reuters Limited 2001.