Sales rise at Siemens, but telecoms drags down profits

Siemens reported an increase in net sales but a drop in net income for the second quarter on Thursday. Income was dragged down by lackluster performance in its Communications division, which manufactures telecommunications and enterprise networking equipment.

The company reported net sales for the third quarter of its fiscal year of €18.75 billion ($22.6 billion as of June 30, the last day of the period reported), up 6.8 percent from €17.55 billion a year earlier.

External sales at the company's Communications division moved up slightly, to €3.26 billion from €3.23 billion, while external sales at Siemens Business Services (SBS), the company's IT consulting division, rose to €979 million from €872 million. The external figures exclude sales to other Siemens business groups.

Net income fell 52 percent to €389 million from €815 million a year earlier. The Communications division made an operating loss of €70 million, down from an operating profit of €209 million a year earlier, hit by the cost of lay-offs and currency fluctuations. Operating losses at SBS increased to €109 million from €2 million a year earlier.

The company also saw declining sales at its Logistics and Assembly Systems division, which made an operating loss of €49 million, compared to an operating profit of €14 million a year earlier. The division's activities include electronics assembly.

The company described the results from its Communications and SBS divisions as "disappointing." To turn these divisions around, Siemens plans to outsource product-related services businesses at SBS, and cut costs at the Communications division to deal with weaknesses in the carrier and enterprise businesses.

Siemens is in the process of selling off its loss-making mobile phone manufacturing business, and is reporting results from those activities as discontinued operations. Excluding such discontinued operations, net income for the quarter was €625 million, down from €871 million.

The company's other activities include the manufacture of equipment for power generation and distribution, transport, automotive, and medical applications.