Siemens warns of lower profit

Pierer is sticking to earnings target despite weak outlook for the next quarter

MUNICH, Germany -- Siemens, the German electronics and engineering giant, on Wednesday said orders tumbled in the third quarter and warned profits would be weaker in the next three months due mainly to a slump in the telecoms sector.

The Munich-based group said orders fell 20 percent to 19.03 billion euros ($18.84 billion) in the third quarter from a year earlier, as demand for mobile phones and wireless networks weakened.

Orders were also lower at its power generation and transportation systems units, the company said, after a record performance last year.

Net income for the third quarter totalled 725 million euros, compared with a loss excluding special items of 705 million a year earlier. Earnings per share were 0.81 euros, compared with a loss of 0.79 euros a year earlier.

Siemens warned that "results for the fourth quarter, however, are expected to come in below third-quarter levels." The company did not provide details of its fourth-quarter outlook, but it has previously stated that its full-year earnings are to be better than it net profit of 624 million euros in fiscal 2001.

Chief Executive Heinrich von Pierer said in a statement that Siemens was "pursuing previously announced earnings targets despite the challenging fourth quarter and extremely difficult market conditions."

Siemens (FSEI) shares were down 3 percent to 48.35 in midday morning trading in Frankfurt on Wednesday.

"The outlook is simply bad, and when you look at the order intake it is really bad," Frank Rothauge, an analyst at Sal. Oppenheim in Frankfurt, told Reuters. "It's all very well that power [generation] had good profit figures, but the orders intake has halved."

Siemens said earnings before interest and tax (EBIT) for the three months to the end of June declined to 892 million euros ($883.2 million), down from 919 million euros in the previous quarter but up from a loss of 479 million euros a year earlier.

Group sales fell 4 percent to 20.5 billion euros in the third quarter from 20.3 billion euros a year earlier, and down from 21.25 billion in the second quarter.

A Reuters poll of analysts had forecast an average EBIT of 634 million euros and sales of 20.65 billion.

Sales at Siemens' information and communications division -- which includes mobile phone handsets and wireless networks -- declined significantly from the previous year as the market continued to be battered by weak demand.

Network sales fell 30.6 percent to 2.19 billion euros in the third quarter from 3.16 billion a year earlier, notching up a loss of 84 million euros. A year earlier, the unit had a loss of 563 million euros.

Handset sales were down 1.5 percent to 2.51 billion euros from 2.54 billion a year earlier. The unit posted a loss of 9 million euros, compared with a 511 million loss in the third quarter of 2001.

Siemens has announced plans to eliminate 29,000 jobs by the end of 2003 as it cuts costs and sells assets.

About 20,000 of those jobs will come from its network and mobile phone unit, with another 4,000 positions to be cut from its industrial solutions and business services division. In additon, 5,000 jobs will be eliminated through the sale of other business units.