Siemens sees Q1 profits soar 39 percent

German equipment manufacturer Siemens AG reported Thursday a 39 percent rise in first-quarter profit, boosted in large part by a surge in mobile phone sales and a turnaround of the group's carrier network unit.

Net profit in the first quarter of the company's 2004 fiscal year rose to €726 million ($912 million as of Dec. 31, 2003, the last day of the period reported) from €521 million in the same period the year before, the company said. Earnings per share for the October to December period were €0.82 per share compared to €0.59 per share for the year-earlier period.

Overall first-quarter sales, however, slipped 2.7 percent to €18.33 billion from €18.84 billion in the same period a year ago. Sales figures were dragged down by the weak performance of some of the company's other units, such as automotive, medical and building technologies.

A key factor contributing to the group's increased profitability in the first quarter was the improved performance of its fixed-line Information and Communications Network (ICN) division, which swung to a €51 million profit from a loss of €151 million a year earlier, Siemens said. Sales in the division's enterprise and carrier network units, however, were down year-on-year.

While the enterprise unit reported first-quarter sales of €870 million, compared to €889 million a year earlier, the carrier unit saw revenue drop to €834 million from €914 million. Both units had been hit by a downturn in equipment spending by enterprises and carriers alike for more than two years.

Another key factor affecting Siemens' first-quarter profitability was the strong demand for the company's mobile phones. First-quarter handset shipments increased to 15.2 million handsets from 11 million units in the same period a year earlier, the Munich-based company said.

In the 2003 calendar year, Siemens introduced 26 new mobile phones and plans to launch an additional 30 this year, said company spokesman Peter Gottal.

Operating profit in the Information and Communication Mobile (ICM) division, which includes the sale of infrastructure equipment for mobile networks, more than doubled year-on-year to €123 million from €59 million.

Siemens Business Services (SBS) division, which offers networking services to enterprises, was also able to increase profits, up to €44 million in the first quarter from €12 million in the year-earlier period. Sales, however, dipped 4 percent to €1.21 billion from €1.27 billion. Market conditions for SBS remained weak in the first quarter, particularly in western Europe, Siemens said.

At Siemens' annual shareholders meeting in Munich on Thursday, Chief Executive Officer (CEO) Heinrich von Pierer reiterated an earlier outlook that the company's net income in its fiscal year will rise by more than 10 percent and sales will advance, said Gottal, who was at the meeting.

Von Pierer also said that the company's internal plans are now based on a euro rate of €1.30 for the current fiscal year, compared with a previous prediction of €1.20.

Due to its global operations, Siemens is less exposed to a weak dollar than many other companies, the CEO said, but he added that substantial currency changes don't leave the German company completely untouched.