Siemens AG announced it intends to shave off its ailing mobile-phone business by spinning it out as a “separate legal unit.” The news comes amid a 35-percent drop in Siemens’ second-quarter net profit, partially due to the failures of its mobile-phone and IT operations, and as quarterly handset rankings show Siemens dropping to sixth place with Sony Ericsson Mobile Communications L.P. squeezing past it into the No. 5 position.
For months, rumors have circulated about Siemens’ mobile-phone plans; the company has promised to mend the business with a restructuring, partnership, sale or closure. Recent reports added Motorola Inc., Nortel Networks Ltd. and Acer to the dozen or so companies rumored to be in talks. Indeed, Siemens’ chief executive Klaus Kleinfeld hinted at the possibility of some sort of agreement “with one or more partners along the value chain,” but did not provide specifics.
Industry watchers speculate there are few in the worldwide electronics industry willing to deal with Siemens’ loss-making phone business.
“We are left guessing-as we have been in the past four months-on how Siemens wants to achieve the turnaround” in its mobile-phone business, said Henning Dransfeld, research director at consulting firm Ovum. “For the moment, no news is not good news.”
Interestingly, Siemens also promised its mobile-phone brand would endure.
“The Siemens mobile-phone brand is also clearly a value,” Kleinfeld said. “Today, we can guarantee our customers that mobile phones will continue to be marketed under the Siemens name. All our options clearly entail this.”
Siemens posted a companywide net income of $1.01 billion, lower than its results in the same quarter last year. The company said it benefited last year from the sale of its Infineon shares plus a related tax benefit. Siemens posted a 4.3-percent rise in revenues in the second quarter to $24 billion.
In its sickly mobile-phone business Siemens reported a loss of $179 million, a reverse on its year-ago profit. The company sold 9.3 million phones in its first quarter, which puts Siemens in last place among the world’s major mobile-phone makers. Indeed, according to research and consulting firm Strategy Analytics, Siemens’ market share dropped by almost 30 percent during the past year while the rest of the world’s major phone makers managed to increase share.
“Most vendors have increased their shipment levels from a year ago, showing that despite a slight downturn from the previous quarter, consumer demand is still strong and vendors are prepared to meet that demand with a broad selection of phones,” said Ramon Llamas, a researcher with consulting firm IDC.
Strategy Analytics found industry shipped 172 million phones worldwide in the first quarter, an increase of 10 percent from the first quarter of last year. The firm predicts handset makers will ship a total of 735 million phones this year, up from last year’s numbers but at a slower growth rate.
Nokia Corp. retained its lead in the phone market in the first quarter, while Motorola and Samsung Electronics Co. Ltd. continued their battle for the No. 2 slot. LG Electronics Co. Ltd. solidified its fourth-place position, and Sony Ericsson sold 100,000 more phones than Siemens to snare the No. 5 spot.
Smart phone shipments
Nokia also managed to lead the smart device market, according to research and consulting firm Canalys. The company increased its share of the smart device market from 28 percent in the first quarter of last year to 50 percent this year. At the same time, No. 2 player Palm-One’s market share dropped from around 17 percent to 9 percent. Research In Motion Ltd. came in third, followed by Fujitsu and Hewlett-Packard Corp. Canalys includes non-wireless personal digital assistants, wireless PDAs and smart phones in its definition of the market.
On the operating system side, the firm found Symbian increased its market share from 40 percent in the first quarter of last year to 61 percent this year. It appears the OS vendor managed to steal share away from Microsoft Corp. and PalmSource Inc.-the No. 2 and 3 players, respectively-as their market-share numbers declined during the period. Indeed, PalmSource was the only listed OS vendor that saw its shipment numbers decrease, from about 1.3 million a year ago to 1.1 million this year.
Canalys said the overall market is increasing, with smart-device shipments topping 10.7 million units in the first quarter compared to the 5.9 million shipped in the same quarter last year.
“Symbian will enjoy the volume Nokia brings, but I expect it would also like to see the other licensees expanding their portfolios,” said Canalys analyst Rachel Lashford. “Their focus remains on producing lower-specification, lower-cost 3G and 2G imaging phones for the mass market. Some enterprise customers may feel uncomfortable about adopting a platform so dominated by one vendor. The recent arrival of the Series 60 based Nokia 3230 heralds the company’s first steps in pushing the OS down into the mid-market, which, if successful, is likely to significantly increase not only Symbian’s volume, but also Nokia’s share of it.”
