JOHANNESBURG - Siemens AG announced its most sweeping overhaul in years as Europe's largest engineering firm tries to adapt to new technologies that are disrupting its core businesses and avoid the fate of General Electric, its struggling rival.
The Munich-based company said it would shrink the number of operating divisions to three from five as it focuses on factory software and energy distribution. It pledged to boost revenue growth and the return on sales of Siemens’s industrial business by 2 percentage points in the medium term even as its once-flagship gas turbine business deteriorated.
The target is a “massive promise to the markets and our shareholders”, said chief executive Joe Kaeser.
The new structure, along with third-quarter earnings, received a cool reception from investors, who sent shares down as much as 5 percent, the most in just over two years. The company's so-called industrial business profit missed estimates and showed a worsening outlook for the power division.
With the reorganisation, Kaeser is aiming to leave a lasting imprint on the once-sprawling manufacturer and guard against GE’s downward spiral.
The flagging US giant has embarked on a far-reaching restructuring plan after getting kicked out of the Dow Jones Industrial Average.
New fields
Siemens shares fell 4.5percent to 114.38 at 11am in Frankfurt yesterday, leaving them 1.4percent lower over the past year compared with a 48percent drop for GE.
Siemens’s overhaul foreshadows investments in new fields such as energy management and charging networks for electric vehicles. On Wednesday, it said it would pay 600million (R9.3billion) to buy Mendix, a coding platform for businesses developing mobile and web apps.