Siemens AG, the No. 3 mobile phone-maker, said it plans to cut another 2,000 jobs and take a charge of as much as 450 million euros (US$399 million) to help boost profitability at its communications divisions.
The additional cuts bring the total announced this year to 8,100, or about 1.7 percent of its workforce. Siemens, which saw fiscal second-quarter profit fall 11 percent, also said it plans to cut costs by 1.4 billion euros.
The slowing economy is forcing companies worldwide to eliminate jobs. European tele-communications companies alone plan to slash more than 25,000 jobs this year. The Dutch office supplies distributor Buhrmann NV also said today it would cut between 1,000 and 1,200 staff, mainly in North America.
"They are doing what they should be doing," said Ilkka Rauvola, an analyst at BNP Paribas in London. "It's prudent management." He rates the stock "neutral."
Siemens shares rose as much as US$0.90, or 1 percent, to 83.50 euros. The shares have declined 11 percent so far this year.
Siemens, which said on April 26 that its facing flagging demand for phones and semiconductors, plans to cut 800 million euros in costs at its network division and fire a total of 5,500 people, or 10 percent of the workforce in the division.
Costs at its cellular phone unit will be reduced by 600 million euros, in part by a previously announced cull of 2,600 workers, or about 9 percent of the employees there, it said.
In the past two years, Siemens sold units accounting for 15 percent of sales while expanding in mobile phones and networks.
Both units are now facing an industry slump as consumers delay cellular-phone purchases to wait for services providing faster Internet access and as economies slow.
At the company's half-year earnings press conference two weeks ago, Chief Executive Heinrich von Pierer wouldn't make a 2001 profit forecast after trimming expectations in March.
Industry handset sales will be "closer to" 400 million this year, the bottom end of its forecast, than 450 million, Siemens told an analyst conference yesterday.
Last month, Ericsson AB reduced its forecast for 2001 industry sales to between 430 million and 480 million phones, from a previous estimate of as many as 525 million units. Nokia Oyj, the No. 1 cell-phone maker, predicts sales of between 450 million and 500 million handsets.
On top of the job cuts, Siemens' networks division will transfer its microwave radio business, which employees 2,000 people, to the mobile phone unit. It will take a charge of as much as 200 million euros in the networks division and another 250 million euros in the mobile phone unit, it said.
The restructuring package will help the networks group to achieve an operating margin of 5 to 6 percent and sales of 14 billion euros to 15 billion euros in the coming fiscal year, Siemens said.
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