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Siemens AG

Siemens AG

Wittelsbacherplatz 2
D 80333 Munich
Germany
Telephone: +49-89-636-3300
Fax: +49-89-636-342-42
Web site: http://www.siemens.com

Public Company
Incorporated: 1966
Employees: 426,000
Sales: $82.9 billion (2002)
Stock Exchanges: New York Berlin Hamburg Dusseldorf Munich Brussels Paris Zurich Basel Geneva Amsterdam Vienna London
Ticker Symbol: SI
NAIC: 541614 Process, Physical Distribution and Logistics Consulting Services; 541513 Computer Facilities Management Services; 541330 Engineering Services; 333319 Other Commercial and Service Industry Machinery Manufacturing; 518210 Automated Data Processing Services; 238210 Electrical Contractors; 221121 Electric Bulk Power Transmission and Control; 221119 Other Electric Power Generation; 421690 Other Electronic Parts and Equipment Wholesalers; 423610 Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers; 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334510 Electromedical and Electrotherapeutic Apparatus Manufacturing; 335122 Commercial, Industrial, and Institutional Electric Lighting Fixture Manufacturing

Founded to manufacture and install telegraphic systems, Germany-based Siemens AG has prospered and grown over 155 years to become a multifaceted electronics and electrical engineering enterprise, and one of the most international corporations in the world. With a presence in more than 190 countries, Siemens primary business operations include information and communications networks, industrial automation and control, power generation and transmission, medical solutions, and lighting. Siemens was once viewed by analysts as a corporate dinosaur and urged to disband its conglomerate structure in favor of a more nimble and tightly focused enterprise. In the 1990s, however, under the leadership of Heinrich von Pierer, the company underwent major restructuring to minimize costs and maximize efficiencies while retaining the synergistic benefits of its broad-based structure. Siemens has entered the 21st century with a new listing on the New York Stock Exchange, and a competitive foothold in the burgeoning information technologies and communications sector.

Company Origins in Telegraph Systems: 184776

Siemens & Halske was founded in Berlin in 1847 by Werner Siemens and J.G. Halske to manufacture and install telegraphic systems. Siemens, a former artillery officer in the Prussian army and an engineer who already owned a profitable patent for electroplating, was the driving force behind the company and remained so for the rest of his life. The company received its first major commission in 1848, when it contracted to build a telegraph link between Berlin and Frankfurt.

Construction of telegraph systems boomed in the mid-19th century, and Siemens & Halske was well equipped to take advantage of the situation. In 1853, it received a commission to build an extensive telegraph system in Russia. Upon its completion, the company opened an office in St. Petersburg under the direction of Werner Siemens brother Carl Siemens. In 1857 Siemens & Halske helped develop the first successful deep sea telegraphic cable. This led to the transformation of the London office into an independent company under the direction of Wilhelm Siemens, another of Werners brothers, the next year. By 1865 the companys English operations had become substantial. Its name was changed to Siemens Brothers, still under the direction of Wilhelm, who was eventually knighted as Sir William Siemens.

In 1867 Siemens Brothers received a contract for an 11,000-kilometer telegraph line from London to Calcutta, which it completed in 1870. In 1871 it linked London and Teheran by telegraph. In 1874 Siemens Brothers launched its own cable laying ship, the Faraday, which William Siemens co-designed. The next year, it laid the first direct transatlantic cable from Ireland to the United States.

Expansion and Diversification: 18771929

In 1877 Alexander Graham Bells new telephones reached Berlin for the first time. Immediately grasping their worth, Werner Siemens quickly patented an improved version of the device and began production. In the next decade, Siemens & Halske also developed and began manufacturing electrical lighting and power generating equipment after Werner Siemens discovered the dynamo electric principle in 1866.

In 1888 Werner Siemens was ennobled by the German kaiser for his achievements. Two years later he retired and his company became a limited partnership shared by his sons Arnold and Wilhelm and his brother Carl. Werner Siemens died in 1892, but the House of Siemens continued to prosper. That same year, Siemens & Halske built a power station at Erding in Bavaria and founded an American subsidiary, Siemens & Halske Electric Company, in Chicago. The latter, however, closed in 1904. In 1895 Wilhelm Conrad Roentgen discovered the X-ray, and the very next year Siemens & Halske owned the first patent for an X-ray tube. In 1897 Siemens & Halske decided to go public and reorganized with Carl Heinrich, now Carl von Siemens after being ennobled by the Russian czar in 1895, as chairman of the supervisory board. He retired after seven years in that post and was succeeded by his nephew Arnold.

Siemens & Halske remained busy as the 19th century gave way to the 20th. In 1903 it established Siemens Schuckertwerke GmbH, a subsidiary devoted to electric power engineering. In 1909 Siemens & Halske developed an automatic telephone exchange serving 2,500 customers in Munich. But when World War I broke out, orders for civilian electrical equipment slowed considerably and the company began production of communications devices for the military. Siemens & Halske also produced explosives, gun locks for rifles, and, later in the war, aircraft engines.

But perhaps the companys most successful contribution to the German war effort was the fire control system it produced for the navys battle cruisers, which proved its worth at the Battle of Jutland in 1916. There, the battle cruiser squadron of the High Seas Fleet met its British counterpart for the only time during the war. While the main fleets fought to a draw, the German battle cruisers used their superior gunnery equipment to batter their opponents, sinking two British ships and severely damaging several others. It was a highlight for the German navy in a battle from which it otherwise won no advantage.

On the balance, however, the war hurt Siemens & Halske badly. The Bolshevik government that seized power in Russia in 1917 also seized the assets of the companys St. Petersburg subsidiary, which were worth about Ru 50 million. Siemens Brothers was taken over by the British government in 1915 and sold to British interests the next year. The company was not returned to the Siemens family after the armistice, although it retained their name for business purposes. Siemens Brothers eventually re-established links to its old parent, and its general manager, Dr. Henry Wright, even became a member of the Siemens & Halske supervisory board in 1929. But Carl Friedrich von Siemens, a son of Werners who had headed the British subsidiary for six years and had many English friends, was shocked by these events; they have stolen our name, he lamented.

Arnold von Siemens died in 1918, before the end of the war. He was succeeded by his brother Wilhelm, who died the next year. Carl Friedrich then became chairman. Despite the precarious state of the German economy in the 1920s and a bias among foreign customers against doing business with a German company, the company continued to make its mark in electrical manufacturing. In 1923 it started producing radio receivers for the consumer market. In the same year, recognizing the growing importance of Japan as an industrial power and not wishing to concede that market to General Electric and Westinghouse, Siemens & Halske set up a Tokyo subsidiary, Fusi Denk, later known as Fuji Electric. In 1925 Siemens began construction of a power station on the Shannon River in Ireland, and in 1927 the company began work on another hydroelectric power station for the Soviet government, near Zaporozhe. Back home in Germany, Siemens & Halske financed and produced a railway network in suburban Berlin that began operation in 1928. By the end of the decade, the company was accounting for one-third of the German electrical manufacturing industrys production and nearly the same proportion of its employees.

The Company During Wartime: 193045

Siemens & Halske was bloodied by the Great Depression, but it survived. It was forced to halve its dividend in the early 1930s and lay off employees in large numbers, but remained on relatively sound financial footing until the Nazi governments rearmament project helped revive its fortunes in 1935. During the remainder of the decade, Siemens & Halske manufactured a wide range of equipment for all of Germanys armed services. One of its most significant technical contributions at this time, the development of an automatic pilot system for airplanes, was the result of a project initiated for the Luftwaffe.

Company Perspectives

For 155 years, the Siemens name has been synonymous with cutting-edge technologies and continuous growth in profitability. With our wide array of products, systems and services, we are world leaders in information and communications, automation and control, power, medical solutions, transportation and lighting. Sustainable success is our number one priority. Our activities focus on meeting the needs of our customers and creating value for our shareholders and employees. Our innovations generated in our own laboratories and in cooperation with customers, business partners and universities are our greatest strength. Siemens GLOBAL NETWORK OF INNOVATION is developing new products and services for a world that while limited in resources is boundless in possibilities.

The companys activities during this time are difficult to evaluate. On the one hand, according to family historian Georg Siemens, Carl Friedrich von Siemens was repelled by the Nazis anti-Semitism from the start and only grew more disgusted with their goals and methods as time went on. Just before his death in 1941, he wrote to an assistant: My work no longer brings me satisfaction or joy. Those who were once proud that their work was devoted to the task of serving progress and humanity, can now only be sad that the results of their work merely serve the evil of destruction. Whenever I start to think, why, I should prefer to creep into a corner, so as not to see or hear any more. Yet there is no question that Siemens & Halske benefited from German rearmament during the late 1930s. Certainly the company did little or nothing to hinder Nazi militarism.

Carl Friedrich went into partial retirement in 1940 and appointed Hermann von Siemens, Arnolds eldest son, to succeed him. By this time, Siemens & Halske was devoting virtually all of its manufacturing capacity to military orders and would do so for the duration of the war. In 1944 it helped develop and manufacture the V 2 rocket. Its factories also suffered substantial damage from Allied bombing raids. After the Soviet army conquered Berlin in 1945, Russian occupation authorities completely dismantled the Siemensstadt factory works and corporate headquarters.

In 1945 Hermann von Siemens, who had also been a director of Deutsche Bank, was arrested by American occupation authorities and interned for two years. There is also no question that the company employed slave labor during the war. Georg Siemens pointed out that every major German industrial concern used forced labor because of manpower shortages caused by the war, and asserted that Siemens & Halske treated its laborers better than most companies. But in 1947, allegations surfaced that three of the firms directors had been active in importing slave laborers from occupied countries. In addition, testimony from Holocaust survivors also surfaced at this time that Siemens had supplied gas chamber equipment to the concentration camps. These allegations were never proven, however, and the company denied them both.

Rebuilding and Reorganization Through the 1950s and 1960s

Hermann von Siemens resumed the chairmanship upon his release in 1948. The company had been devastated by the war and required years of rebuilding to get back on its feet. Its corporate headquarters was relocated to Munich in 1949. By the early 1950s, Siemens & Halske was once again producing railroad, medical, telephone, and power generating equipment, as well as consumer electronics products. In 1954 it established an American subsidiary in New York, Siemens Inc. Its first product sold to the American market was an electron microscope. In the mid-1950s Siemens & Halske entered the burgeoning fields of data processing and nuclear power. It introduced its first mainframe computer in 1955, and its first nuclear reactor went into service in 1959 at Munich Garching.

Hermann von Siemens retired in 1956 and was succeeded by Ernst von Siemens, Carl Friedrichs only son. In the mid-1960s, Siemens & Halske technology went to Mars after the company developed a disc seal triode that was used in the transmitter of the American space probe Mariner IV. In 1965 it scored another coup when its 03 high-speed passenger train went into service with the German Federal Railway. Three years later, it began constructing a nuclear power station at Atucha, Argentina, the first such facility in South America.

The company underwent a major reorganization in 1966, bringing all of its subsidiaries directly under control of the parent company and reincorporating as Siemens A.G. By the end of the decade, worldwide sales had reached DM 10 billion; in 1970 they reached DM 12.6 billion. In 1971 Ernst von Siemens retired and his cousin Peter succeeded him as chairman.

Key Dates

1847:
Siemens & Halske is founded in Berlin by Werner Siemens and J.G. Halske to manufacture and install telegraphic systems.
1877:
Werner Siemens quickly patents an improved version of Alexander Graham Bells telephone and begins production.
1892:
Siemens & Halske build a power station at Erding in Bavaria and establish an American subsidiary, Siemens & Halske Electric Company, in Chicago.
1897:
Siemens & Halske goes public.
1903:
The company establishes Siemens Schuckertwerke GmbH, a subsidiary devoted to electric power engineering.
1923:
The company starts producing radio receivers for the consumer market and establishes a Tokyo subsidiary, Fusi Denk, later known as Fuji Electric.
1949:
The company moves its corporate headquarters to Munich.
1966:
The company undergoes a major reorganization, bringing all of its subsidiaries directly under the control of the parent company and reincorporating as Siemens A.G.
1978:
Fortune magazine declares that Siemens has outpaced Westinghouse to become GEs primary competition.
1992:
Siemens joins forces with IBM and Toshiba Corp. to develop 256M-bit chips to create microprocessors with the power of supercomputers.
1998:
Company head Heinrich von Pierer introduces a ten-point excellence plan to increase earnings and crack down on underperforming businesses.
2001:
Siemens makes its first listing on the New York Stock Exchange.

Prospering in the 1970s

The 1970s were prosperous years for Siemens. Despite a slower worldwide economy that curbed customer orders in some areas and forced the company to cut its workforce, sales grew to DM 20.7 billion and net profits to DM 606 million in 1976. When the summer Olympic Games came to Munich in 1972, Siemens was its first official supplier of telecommunications and data processing equipment. In 1977 the company entered into a joint venture with the American engineering firm Allis Chalmers, called Siemens Allis Inc., to market turbine generators in the United States. In fact, Siemens status as an electrical manufacturer rose to the point that Fortune wrote in 1978 that it had replaced Westinghouse in General Electrics demonology. Siemens had replaced Westinghouse as the worlds number two electrical manufacturing concern, ranking as GEs major worldwide competitor in everything from motors and switchgear to generators and nuclear reactors. It also had raised its share of the West German mainframe computer market to 21 percent, cutting sharply into IBMs position as the Bundesrepubliks leading mainframe supplier.

In the late 1970s, Siemens stumbled when it initiated a research and development effort in microcircuit technology, against the advice of a consulting firm employed by the West German government to counsel the nations industrial companies. It was thought that Siemens slow and methodical practices would render it unable to keep up with the smaller, quicker Silicon Valley firms that were breaking ground in this area. Nonetheless, Siemens A.G., with its research and development budget of $1 billion (one-eighth of all the money spent by West German industry on research at the time), eventually entered into a joint venture with Dutch rival Philips to develop advanced microcircuits. None of the companys efforts on this front proved successful, however. Its components division lost money through 1987 and Siemens was forced to buy chips from Toshiba to meet its commitments until its own became available in early 1988.

Keeping Pace with High Technology and Globalization in the 1980s and 1990s

In 1981 Peter von Siemens retired and was succeeded by Bernhard Plettner. For the first time, the Siemens family relinquished day-to-day control over the company it had founded over a century ago. But the 67-year-old Plettner had worked for Siemens for all of his adult life, and Peter von Siemens felt that his own son, at the age of 44, was still too young and inexperienced for the top job.

Under Plettner and new CEO Karlheinz Kaske, Siemens embarked on an expensive and ambitious program of acquisitions and research and development to try to make itself into a world leader in high technology. Its effort to develop its own microchips was a part of that effort, as was the acquisition of IBMs struggling Rolm Systems subsidiary in 1988. That deal cost Siemens $844 million, but gave it control of the third largest supplier of PBX telephone switching equipment in North America. Siemens strategy during the 1980s was designed to pay off over the long term and produced few tangible benefits in the short run. The company spent $24 billion on both research and development and acquisitions between 1983 and 1988, and the tremendous cash drain produced both a significant drop in earnings and a cut in the dividend in 1988. As one analyst told Business Week in 1988, Siemens will be an interesting story in the 1990s.

As the company entered the new decade, globalization became a vital part of its policyand that meant a readjustment of the companys homogeneous culture. Europe was facing a recession and the Asian and South American markets offered huge opportunities for growth. To help guide the new direction of Siemens, the company appointed Hermann Franz as chairman and Heinrich von Pierer as president and CEO. The appointment of Dr. Heinrich von Pierer as chief executive in 1992 reflected the need for a cultural change and the drive for higher profitability.

Siemens had always been dominated by engineers. When von Pierer, an economist and lawyer, was elected to head the company, it was seen as a commitment to greater commercialism for the company. Von Pierers guidance stressed three fundamental trends: the first was that 85 percent of Siemens business would be conducted either in global markets or in markets that showed an unmistakable trend toward globalization; second, that significant improvements in manufacturing depended on reducing manufacturing depth; and third, that software was increasingly the crucial commercial factor.

Within the company, von Pierer caused a cultural revolution. He continued the reorganization begun by his predecessor, Kaske, and developed a program designed to make Siemens more competitive with Japanese companies by making it more responsive to market pressures. He replaced the hierarchical structure and engineering focus with a new emphasis on innovation and service. He gave managers in local markets free rein to cut costs and bid for projects, while also appointing a younger generation of managers in their 40s. Moreover, von Pierer cut Siemens workforce by 7.5 percent and sold $2 billion in non-core businesses and slashed $3.6 billion in operating expenses by fiscal 1995. He continually asked if the company was flexible and changing enough, and at one point, included self-addressed postcards in the company magazine urging employees to send him their ideas.

Such measures were part of a strategy to get Siemens into new high-growth markets, especially in Asia. Von Pierer planned to invest $3.4 billion in Asia by the year 2000 and to double sales to $14.3 billion, according to Business Week in 1995. He set up facilities in Asia and Eastern Europe to lower costs and reach new customers, and bought telecommunications units in the United States and Italy. He also planned further acquisitions to move more production out of Germany. The strategy began to pay off. While net profits slipped 17 percent to $1.18 billion in 1994, earnings jumped 8 percent in three months and analysts saw a 20 percent increase for the year. As of 1995, sales continued to increase and the declining profits for the company began to increase.

In another move toward globalization, an international partnership brought Siemens together with the worlds largest computer maker and Japans second largest chip maker. In 1992, Siemens joined forces with IBM and Toshiba Corporation to develop 256M-bit chips to create microprocessors with the power of supercomputers. The first chip was expected to be marketed in 1998. The estimated cost for the project was a billion dollars for designing the chip and another billion for setting up the manufacturing facilities. The Siemens, IBM, and Toshiba alliance was expected to become the industry norm given rising operation costs and the focus towards a borderless world economy.

Innovation was always a part of Siemens tradition. But new social pressures and rapidly changing technology throughout the world brought new challenges to Siemens as it faced the 21st century. To deal with this new business market, Siemens used its tradition of intelligence, resources, and systematic application to remain a strong international force. As von Pierer stated in Siemens 1994 annual report: Helping set the course of change has been a vital part of our business for nearly 150 years. Fifteen years ago, barely half of our worldwide sales came from products that were less than five years old. This figure has now risen to more than two-thirdssolid proof that we are not just meeting increased demands for change, but are setting the pace for innovation.

Radical Restructuring for the 21st Century

The mid-1990s proved to be difficult years for Siemens. Coupled with sluggish conditions in Europe, the 1996 onset of the economic crisis in east Asia took a serious toll, diminishing the companys profits by two-thirds between 1996 and 1998. Analysts critiqued Siemens for being too slow to respond to the new demands of the rapidly globalizing business environment, and many called for the company to overhaul its old economy conglomerate structure, especially by unloading those businesses dependent on slow-growing markets, such as power generation.

Under the time-optimized processes, or Top, program, a three-pronged strategy promoting cost-reduction, growth, and innovation, management had effected significant restructuring and substantial productivity gains since the early 1990s. Profits were still not sufficient, however, to finance the international expansion needed to keep up with competitors. The companys earnings were particularly impaired by its semiconductor business, which, after being hard hit by a vicious price war for memory chips, lost $727 million in 1998. Other problem divisions included power generation, transportation systems, and private communication networks.

In spite of criticism, von Pierer held fast to his traditionalist belief that there were valuable synergies between the various arms of Siemens business activities, especially as nearly all of the companys businesses were in electrics or electronics, and as the broad scope of activities helped to insulate Siemens from the inevitable ups and downs of different business cycles. By 1998, however, the CEO conceded that the company had diluted its overall strength by stretching itself in too many directions at once. Resolving to keep only the businesses in which Siemens could maintain market leadership, von Pierer moved to discontinue more than 30 of the companys minor operations, including those in military electronics and dental equipment. This also included selling its stake in the suffering telecom group GPT to the U.K.-based GEC. Still, most investors remained frustrated, contending that this streamlining constituted little more than a piecemeal restructuring and was not radical enough to restore the ailing company to solid profitability.

Finally, in late 1998 von Pierer introduced a global ten-point plan that was heralded as a revolution for the 153-year-old company. Under this sweeping shake-up, designed to bolster earnings and eliminate underperformance, Siemens would sell or spin off one-seventh of its entire domain, divisions with combined annual sales of more than $10 billion. Key to this unburdening, Siemens had resolved to spin off Infineon, its highly cyclical semiconductor business, which was forecasting huge losses again in 1998. Further, the company let go of businesses that made copper cable, electronic components, and locomotives.

The revamped Siemens consisted of four main divisions: power generation, industry, rail systems, and information and communications. To shore up power generation and achieve critical cost-cutting, Siemens purchased the electricity generation arm of Westinghouse in August 1998. With the establishment of Siemens Westinghouse Power Corporation, Siemens was well positioned to take advantage of strong demand in the United States, and to restructure its manufacturing operations worldwide. Further, the acquisition represented a major stride toward relocating the bulk of Siemens manufacturing outside of Germany, another of von Pierers goals. The industry division had undergone its own rigorous restructuring under the leadership of Edward Krubasik and, with a 60 percent profit increase in 1997, was beginning to thrive. Krubasik had introduced best-practice initiatives, joint account teams, and other measures to bring cohesion to the divisions loosely bundled units, whose activities ranged from industrial plant building to automated machines. Rail systems, which lost $479 million in 1997, was Siemens least vital division. With von Pierers shake-up, it received a new management team charged with strengthening operations enough to make the division salable in the coming years.

Information and communications was Siemens biggest division. Here, the company hoped to forge partnerships in its mobile phones and personal computers businesses, both areas in which it lacked sufficient market share to compete effectively on its own. Further, while it had a secure stake in the traditional telecoms switching market, a strategic acquisition was needed to bring the division up to speed with Internet-based network technologies, a crucial area of competence, as the world volume of data traffic was projected to surpass that of voice telephone communication in the coming years.

Success in this area depended on executing a major push into the U.S. market, where the pace of competition was being set by such companies as Nortel Networks, Lucent Technologies, and Cisco Systems. To this end, in 1999 Siemens acquired two Massachusetts-based private data networking companies, Castle Networks Inc. and Argon Networks Inc., for the establishment of a new, Boston-based subsidiary. Further, in 2001 the company made its first listing on the New York Stock Exchange, laying the groundwork for future stock-based acquisitions. Also that year, Siemens adopted more transparent U.S.-style accounting practices, and published its annual results accordingly.

Analysts applauded von Pierers visionary restructuring, as Siemens saw its earnings double in 1999; moreover, net income increased from EUR 1.2 billion in 1999 to EUR 8.9 billion in 2000. With retirement on the horizon in 2004, von Pierer continued to laud the synergistic benefits of Siemens conglomerate structure. As he told the Financial Times of London on January 21, 2002, Our relative strength is that we are in a range of different businesses which are subject to different economic cycles. The validity of this approach was not appreciated by everyone a few years ago.

Still, in the ongoing quest to establish its standing as a world-class company, Siemens continued to conduct surgery on itself in the early years of the 21st century, excising fat from all divisions and honing its focus on IT & Communications and Industry. Von Pierer was particularly intent on restoring profitability to the three IT-related divisions of telecom equipment, mobile phones, and business services, through job cuts, the closure of non-essential manufacturing sites, and a redoubled push to bring new products to market. Having used similar strategies to achieve major turnarounds in the formerly loss-plagued medical equipment and trains divisions, it seemed likely that Siemens would meet its mark.

Principal Subsidiaries

Acuson Corporation; BSH Bosch und Siemens Hausgeräte GmbH; Efficient Networks, Inc.; Fujitsu Siemens Computers (Holding) BV; Infineon Technologies AG; OSRAM GmbH; Siemens Airfield Solutions; Siemens Building Technologies AG; Siemens Corporation; Siemens Dematic AG; Siemens Energy & Automation, Inc.; Siemens Industrial Solutions and Services Group; Siemens Information and Communications; Siemens Power Generation Group; Siemens Power Transmission and Distribution Group; Siemens Solar Group; Siemens Transportation Systems Group; Siemens VDO Automotive.

Principal Competitors

ABB Ltd.; General Electric Company; Hitachi, Ltd.

Further Reading

Althaus, Sarah, Siemens Dinosaur Learns Laws of Evolution: A Further Quantum Leap Is Needed to Turn the Industrial Blue Chip into a World-Class Company, Financial Times (London), November 5, 1999, p. 32.

Andrews, Edmund L., Siemens to Sell Big Units in Bid to Shore Up Profitability, New York Times, November 5, 1998, p. C4.

Barber, Lionel, and Bertrand Benoit, A Pragmatic Capitalist and Social Romantic: Interview [with] Heinrich von Pierer, Siemens, Financial Times (London), November 27, 2000, p. 18.

Benoit, Bertrand, Siemens Discovers the Downside of Shareholder Capitalism: Concerns for Industrial Divisions Are Both Structural and Cyclical, Financial Times (London), October 18, 2001, p. 28.

Benoit, Bertrand, and Peter Marsh, A Good Argument for Corporate Pragmatism: Interview [with] Heinrich von Pierer, Chief Executive, Siemens, Financial Times (London), December 4, 2002, p. 13.

Bowley, Graham, Its Payback Time for Siemens Industrious Unit Chief: Edward Krubasik Has Cut Back, Restructured and Boosted Productivity to Leave the Industry Division One of the German Groups Best, Financial Times (London), October 13, 1998, p. 27.

_____, New Lean Siemens May Still Need Toning Up, Financial Times (London), November 6, 1998, p. 28.

Face to Face with Technology, Berlin: Siemens Aktiengesellschaft, 1991.

Goodwin, Jack S., and Robert M. Fulmer, Management Development at Siemens Electronics: Hitting a Moving Target, Journal of Management Development, September 1992, pp. 4046.

Half Way There: Siemens, Economist, July 4, 1992, p. 60.

Harrison, Michael, Chip War Forces Siemens Shake-Up, Independent (London), July 17, 1998, p. 19.

Hussain, Ahrar, SiemensA Tradition of Excellence, Economic Review, August 1994, p. 109.

Kohn, Rudiger, Siemens Plans Radical Restructuring, Financial Times (London), February 21, 2000, p. 28.

Lineback, J. Robert, Siemens Braces for Rough Road Ahead, Electronic News, March 22, 1993, p. 18.

Marsh, Peter, Engineering a Recovery: Management Siemens: Transforming an Old-Economy Manufacturer Requires Not Only Cost-Cutting, But Also Growth and Innovation, Financial Times (London), August 8, 2000, p. 10.

_____, Westinghouse Buy Sets Foundation for Profitability, Financial Times (London), June 10, 1999, p. 6.

Miller, Karen Lowry, Siemens Shapes Up: So Long Plodding Perfectionism. Hello, Aggressiveness, Business Week, May 1, 1995, pp. 5253.

Munchau, Wolfgang, Germany Needs Its Works CouncilsThe Head of Siemens Tells Wolfgang Munchau Why Consultation with Workers Is Necessary, Financial Times (London), December 17, 1995, p. 23.

Panni, Aziz, Sea Change at Siemens, Management Today, March 1994, p. 50.

Procassini, Andrew, Alliances and Opportunities, Electronic News, September 28, 1992, p. 8.

Schares, Gail E., Jonathan B. Levine, and Peter Coy, The New Generation at Siemens, Business Week, March 9, 1992, p. 46.

Schiesel, Seth, Siemens Plans U.S. Venture in Data Market, New York Times, March 4, 1999, p. C1.

Scott J.D., Siemens Brothers, 18581958, London: Weidenfeld and Nicolson, 1959.

Siemens, Georg, History of the House of Siemens, translated by A.F. Rodger and Lawrence N. Hold, Munich: Karl Alber, 1957.

Siemens, Werner von, Inventor and Entrepreneur: Recollections of Werner von Siemens, London: Lund Humphries, 1966.

Technical Opportunities Beckon in Eastern Europe, Design News, September 20, 1993, p. 250.

Wagstyl, Stefan, and Graham Bowley, A Strategist Who Has Everything to Play for: Profile Heinrich von Pierer, Chief Executive, Siemens, Financial Times (London), April 20, 1998, p. 11.

updates: Beth Watson Highman, Erin Brown

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Siemens A.G.

Siemens A.G.

Wittelsbacherplatz 2
D 80333 Munich
Germany
(0 89) 234-2812
Fax: (0 89) 234-2825

Public Company
Incorporated: 1966
Employees: 377,000
Sales: DM84.6 billion
Stock Exchanges: Berlin Hamburg Dusseldorf Munich
Brussels Paris Zurich Basle Geneva Amsterdam Vienna
London
SICs: 6719 Holding Companies, Not Elsewhere Classified;
3674 Semiconductors & Related Devices; 3571 Electronic
Computers; 3861 Photographic Equipment

Siemens A.G. is Europes largest electrical and electronics company, producing over 50,000 products manufactured at 400 sites in 40 countries. Referring to the companys history of achieving success through well engineered refinements of other peoples inventions, one Fortune analyst noted that second is best might well serve as Siemens motto. But opportunism is not the only interesting facet of Siemens history, which is also a story of a long family tradition and intimate involvement with some of the most important events of the 19th and 20th centuries.

Siemens & Halske was founded in Berlin in 1847 by Werner Siemens and J. G. Halske to manufacture and install telegraphic systems. Siemens, a former artillery officer in the Prussian army and an engineer who already owned a profitable patent for electroplating, was the driving force behind the company and remained so for the rest of his life. The company received its first major commission in 1848, when it contracted to build a telegraph link between Berlin and Frankfurt.

Construction of telegraph systems boomed in the mid 19th century, and Siemens & Halske was well equipped to take advantage of the situation. In 1853, it received a commission to build an extensive telegraph system in Russia. Upon its completion, the company opened an office in St. Petersburg under the direction of Werner Siemens brother Carl Siemens. In 1857 Siemens & Halske helped develop the first successful deep sea telegraphic cable. This led to the transformation of the London office into an independent company under the direction of Wilhelm Siemens, another of Werners brothers, the next year. By 1865 the companys English operations had become substantial. Its name was changed to Siemens Brothers, still under the direction of Wilhelm, who was eventually knighted as Sir William Siemens.

In 1867 Siemens Brothers received a contract for an 11,000 kilometer telegraph line from London to Calcutta, which it completed in 1870. In 1871 it linked London and Teheran by telegraph. In 1874 Siemens Brothers launched its own cable laying ship, the Faraday, which William Siemens co-designed. The next year, it laid the first direct transatlantic cable from Ireland to the United States.

In 1877 Alexander Graham Bells new telephones reached Berlin for the first time. Immediately grasping their worth, Werner Siemens quickly patented an improved version of the device and began production. In the next decade, Siemens & Halske also developed and began manufacturing electrical lighting and power generating equipment after Werner Siemens discovered the dynamo electric principle in 1866.

In 1888 Werner Siemens was ennobled by the German kaiser for his achievements. Two years later he retired and his company became a limited partnership shared by his sons Arnold and Wilhelm and his brother Carl. Werner Siemens died in 1892, but the House of Siemens continued to prosper. That same year, Siemens & Halske built a power station at Erding in Bavaria and founded an American subsidiary, Siemens & Halske Electric Company, in Chicago. The latter, however, closed in 1904. In 1895 Wilhelm Conrad Roentgen discovered the X ray, and the very next year Siemens & Halske owned the first patent for an X ray tube. In 1897 Siemens & Halske decided to go public and reorganized with Carl Heinrich, now Carl von Siemens after being ennobled by the Russian czar in 1895, as chairman of the supervisory board. He retired after seven years in that post and was succeeded by his nephew Arnold.

Siemens & Halske remained busy as the 19th century gave way to the 20th. In 1903 it established Siemens Schuckertwerke GmbH, a subsidiary devoted to electric power engineering. In 1909 Siemens & Halske developed an automatic telephone exchange serving 2,500 customers in Munich. But when World War I broke out, orders for civilian electrical equipment slowed considerably and the company began production of communications devices for the military. Siemens & Halske also produced explosives, gun locks for rifles, and, later in the war, aircraft engines.

But perhaps the companys most successful contribution to the German war effort was the fire control system it produced for the navys battlecruisers, which proved its worth at the Battle of Jutland in 1916. There, the battlecruiser squadron of the High Seas Fleet met its British counterpart for the only time during the war. While the main fleets fought to a draw, the German battlecruisers used their superior gunnery equipment to batter their opponents, sinking two British ships and severely damaging several others. It was a highlight for the German navy in a battle from which it otherwise won no advantage.

On the balance, however, the war hurt Siemens & Halske badly. The Bolshevik government that seized power in Russia in 1917 also seized the assets of the companys St. Petersburg subsidiary, which were worth about 50 million rubles. Siemens Brothers was taken over by the British government in 1915 and sold to British interests the next year. The company was not returned to the Siemens family after the armistice, although it retained their name for business purposes. Siemens Brothers eventually re established links to its old parent and its general manager, Dr. Henry Wright, even became a member of the Siemens & Halske supervisory board in 1929. But Carl Friedrich von Siemens, a son of Werners who had headed the British subsidiary for six years and had many English friends, was shocked by these events; they have stolen our name, he lamented.

Arnold von Siemens died in 1918, before the end of the war. He was succeeded by his brother Wilhelm, who died the next year. Carl Friedrich then became chairman. Despite the precarious state of the German economy in the 1920s and a bias among foreign customers against doing business with a German company, the company continued to make its mark in electrical manufacturing. In 1923 it started producing radio receivers for the consumer market. In the same year, recognizing the growing importance of Japan as an industrial power and not wishing to concede that market to General Electric and Westinghouse, Siemens & Halske set up a Tokyo subsidiary, Fusi Denk, later known as Fuji Electric. In 1925 Siemens began construction of a power station on the Shannon River in Ireland, and in 1927 the company began work on another hydroelectric power station for the Soviet government, near Zaporozhe. Back home in Germany, Siemens & Halske financed and produced a railway network in suburban Berlin that began operation in 1928. By the end of the decade, the company was accounting for one third of the German electrical manufacturing industrys production and nearly the same proportion of its employees.

Siemens & Halske was bloodied by the Great Depression, but it survived. It was forced to halve its dividend in the early 1930s and lay off employees in large numbers, but remained on relatively sound financial footing until the Nazi governments rearmament project helped revive its fortunes in 1935. During the remainder of the decade, Siemens & Halske manufactured a wide range of equipment for all of Germanys armed services. One of its most significant technical contributions at this time, the development of an automatic pilot system for airplanes, was the result of a project initiated for the Luftwaffe.

The companys activities during this time are difficult to evaluate. One the one hand, according to family historian Georg Siemens, Carl Friedrich von Siemens was repelled by the Nazis anti-Semitism from the start and only grew more disgusted with their goals and methods as time went on. Just before his death in 1941, he wrote to an assistant: my work no longer brings me satisfaction or joy. Those who were once proud that their work was devoted to the task of serving progress and humanity, can now only be sad that the results of their work merely serve the evil of destruction. Whenever I start to think, why, I should prefer to creep into a corner, so as not to see or hear any more. And yet there is no question that Siemens & Halske benefited from German rearmament during the late 1930s. Certainly the company did little or nothing to hinder Nazi militarism.

Carl Friedrich went into partial retirement in 1940 and appointed Hermann von Siemens, Arnolds eldest son, to succeed him. By this time, Siemens & Halske was devoting virtually all of its manufacturing capacity to military orders and would do so for the duration of the war. In 1944 it helped develop and manufacture the V 2 rocket. Its factories also suffered substantial damage from Allied bombing raids. And after the Soviet army conquered Berlin in 1945, Russian occupation authorities completely dismantled the Siemensstadt factory works and corporate headquarters.

In 1945 Hermann von Siemens, who had also been a director of Deutsche Bank, was arrested by American occupation authorities and interned for two years. There is also no question that the company employed slave labor during the war. Georg Siemens pointed out that every major German industrial concern used forced labor because of manpower shortages caused by the war, and asserted that Siemens & Halske treated its laborers better than most companies. But in 1947, allegations surfaced that three of the firms directors had been active in importing slave laborers from occupied countries. In addition, testimony from Holocaust survivors also surfaced at this time that Siemens had supplied gas chamber equipment to the concentration camps. These allegations were never proven, however, and the company denied them both.

Hermann von Siemens resumed the chairmanship upon his release in 1948. The company had been devastated by the war and required years of rebuilding to get back on its feet. Its corporate headquarters were relocated to Munich in 1949. By the early 1950s, Siemens & Halske was once again producing railroad, medical, telephone, and power generating equipment, as well as consumer electronics products. In 1954 it established an American subsidiary in New York, Siemens Inc. Its first product sold to the American market was an electron microscope. In the mid-1950s Siemens & Halske entered the burgeoning fields of data processing and nuclear power. It introduced its first mainframe computer in 1955, and its first nuclear reactor went into service in 1959 at Munich Garching.

Hermann von Siemens retired in 1956 and was succeeded by Ernst von Siemens, Carl Friedrichs only son. In the mid 1960s, Siemens & Halske technology went to Mars after the company developed a disc seal triode that was used in the transmitter of the American space probe Mariner IV. In 1965 it scored another coup when its 03 high-speed passenger train went into service with the German Federal Railway. And in 1968, it began constructing a nuclear power station at Atucha, Argentina, the first such facility in South America.

The company underwent a major reorganization in 1966, bringing all of its subsidiaries directly under control of the parent company and reincorporating as Siemens A.G. By the end of the decade, worldwide sales had reached DM10 billion; in 1970 they reached DM12.6 billion. In 1971 Ernst von Siemens retired and his cousin Peter succeeded him as chairman.

The 1970s were prosperous years for Siemens. Despite a slower worldwide economy that cut into customer orders in some areas and forced the company to cut its workforce, sales grew to DM20.7 billion and net profits to DM606 million in 1976. When the summer Olympic Games came to Munich in 1972, Siemens was its first official supplier of telecommunications and data processing equipment. In 1977 the company entered into a joint venture with the American engineering firm Allis Chalmers, called Siemens Allis Inc., to market turbine generators in the United States. In fact, Siemens status as an electrical manufacturer rose to the point that Fortune wrote in 1978 that it had replaced Westinghouse in General Electrics demonol-ogy. Siemens had replaced Westinghouse as the worlds number two electrical manufacturing concern, ranking as GEs major worldwide competitor in everything from motors and switchgear to generators and nuclear reactors. It had also raised its share of the West German mainframe computer market to 21 percent, cutting sharply into IBMs position as the Bundesrepubliks leading mainframe supplier.

In the late 1970s, Siemens stumbled when it initiated a research and development effort in microcircuit technology, against the advice of a consulting firm employed by the West German government to counsel the nations industrial companies. It was thought that Siemens slow and methodical practices would render it unable to keep up with the smaller, quicker Silicon Valley firms that were breaking ground in this area. Nonetheless, Siemens A.G., with its research and development budget of $ 1 billion (one eighth of all the money spent by West German industry on research at the time), eventually entered into a joint venture with Dutch rival Philips to develop advanced microcircuits. None of the companys efforts on this front proved successful, however. Its components division lost money through 1987 and Siemens was forced to buy chips from Toshiba to meet its commitments until its own became available in early 1988.

In 1981 Peter von Siemens retired and was succeeded by Bernhard Plettner. For the first time, the Siemens family relinquished day-to-day control over the company it had founded over a century ago. But the 67-year-old Plettner had worked for Siemens for all of his adult life, and Peter von Siemens felt that his own son, at the age of 44, was still too young and inexperienced for the top job.

Under Plettner and new CEO Karlheinz Kaske, Siemens embarked on an expensive and ambitious program of acquisitions and research and development to try to make itself into a world leader in high technology. Its effort to develop its own microchips was a part of that effort, as was the acquisition of IBMs struggling Rolm Systems subsidiary in 1988. That deal cost Siemens $844 million, but gave control of the third largest supplier of PBX telephone switching equipment in North America. Siemens strategy during the 1980s was designed to pay off over the long term and produced few tangible benefits in the short run. The company spent $24 billion on both research and development and acquisitions between 1983 and 1988, and the tremendous cash drain produced both a significant drop in earnings and a cut in the dividend in 1988. As one analyst told Business Week m 1988, Siemens will be an interesting story in the 1990s.

As the company entered the new decade, globalization became a vital part of its policyand that meant a readjustment of the companys homogeneous culture. Europe was facing a recession and the Asian and South American markets offered huge opportunities for growth. To help guide the new direction of Siemens, the company appointed Hermann Franz as chairman and Heinrich von Pierer as president and CEO. The appointment of Dr. Heinrich von Pierer as chief executive in 1992 reflected the need for a cultural change and the drive for higher profitability.

Siemens had always been dominated by engineers. When von Pierer, an economist and lawyer, was elected to head the company, it was seen as a commitment to greater commercialism for the company. Von Pierers guidance stressed three fundamental trends: the first was that 85 percent of Siemens business would be conducted either in global markets or in markets that showed an unmistakable trend toward globalization; second, that significant improvements in manufacturing depended on reducing manufacturing depth; and third, that software was the increasingly the crucial commercial factor.

Within the company, von Pierer caused a cultural revolution. He continued the reorganization begun by his predecessor, Kaske, and developed a program designed to make Siemens more competitive with Japanese companies by making it more responsive to market pressures. He replaced the hierarchical structure and engineering focus with a new emphasis on innovation and service. He gave managers in local markets free rein to cut costs and bid for projects, while also appointing a younger generation of managers in their 40s. Moreover, von Pierer cut Siemens workforce by 7.5 percent and sold $2 billion in non-core businesses and slashed $3.6 billion in operating expenses by fiscal year end 1995. He continually asked if the company was flexible and changing enough, and at one point, included self-addressed postcards in the company magazine urging employees to send him their ideas.

Such measures were part of a strategy to get Siemens into new high-growth markets especially in Asia. Von Pierer planned to invest $3.4 billion in Asia by the year 2000 and to double sales to $14.3 billion, according to Business Week in 1995. He set up facilities in Asia and Eastern Europe to lower costs and reach new customers, and bought telecommunications units in the United States and Italy. He also planned further acquisition to move more production out of Germany. The strategy began to pay off. While net profits slipped 17 percent to $1.18 billion in 1994, earnings jumped eight percent in three months and analysts saw a 20 percent increase for the year. As of 1995, sales continued to increase and the declining profits for the company began to increase.

In another move toward globalization, an international partnership brought Siemens together with the worlds largest computer maker and Japans second largest chip maker. In 1992, Siemens joined forces with IBM and Toshiba Corp. to develop 256M-bit chips to create microprocessors with the power of supercomputers. The first chip was expected to be marketed in 1998. The estimated cost for the project was a billion dollars for designing the chip and another billion for setting up the manufacturing facilities. The Siemens, IBM, and Toshiba alliance was expected to become the industry norm given rising operation costs and the focus towards a borderless world economy.

Innovation has always been a part of Siemens tradition. But new social pressures and rapidly changing technology throughout the world brought new challenges to Siemens as it faced the 21st century. To deal with this new business market, Siemens used its tradition of intelligence, resources, and systematic application to remain a strong international force. As von Pierer stated in Siemens 1994 annual report: Helping set the course of change has been a vital part of our business for nearly 150 years.... Fifteen years ago, barely half of our worldwide sales came from products that were less than five years old. This figure has now risen to more than two-thirdssolid proof that we are not just meeting increased demands for change, but are setting the pace for innovation.

Principal Subsidiaries

Siemens Nixdorf Informationssysteme AG; Osram GmbH; Vacuumschmelze GmbH; Due wag AG (97%); Siemens Matsushita Components GmbH & Co. KG (50%); Siemens S.A., Saint-Gilles (Brussels); Siemens A/S, Ballerup (Copenhagen); Siemens Osakeyhtiö, Espoo (Helsinki); Siemens S.A. Saint-Denis (Paris); Siemens A.E., Elektrotechnische Projekte und Erzeugnisse (Athens); Siemens plc, Brackneil (London); Siemens Ltd., Dublin; Siemens S.p.A., Milan; Siemens Nederland N.V., The Hague; Siemens A/S, Oslo; Siemens AG Österreich, Vienna (74%); Siemens S.A., Lisbon; Siemens AB, Stockholm; Siemens-Albis AG, Zurich (78%); Siemens S.A., Madrid; Simko Ticaret ve Sanayi A.S., Istanbul (51%); Siemens Nixdorf Information Systems S.A./N.V., Brussels; Siemens Nixdorf Information Systems S.A., Cergy (Paris); Siemens Nixdorf Information Systems Ltd., Bracknell (London); Siemens Nixdorf Informatica S.p. A., Milan (51%); Siemens Nixdorf Informatiesystemen B.V., Zoeter-meer/Netherlands; Siemens Nixdorf Informationssysteme Ges.m.b.H., Vienna; Siemens Nixdorf Informationssysteme AG, Kloten (Zurich); Siemens Nixdorf Sistemas de Información S.A., Tres Cantos (Madrid); Osram S.A., Molsheim/France; Osram Ltd., Wembley (London); Osram Società Riunite Osram Edison-Clerici S.p A., Milan; Siemens U.S.; Siemens Electric Ltd., Mississauga (Ontario); Siemens S.A. de C.V., Mexico City; Osram S.A. de C.V., Tultitlan/Mexico; Siemens S.A., Buenos Aires; Siemens S.A., Sao Paulo (82%); Siemens S.A., Bogotá (94%); Siemens S.A., Caracas; Osram Argentina S.A.C.I., Buenos Aires (66%); Osram do Brasil-Companhia de Lâmpadas Eléctricas S.A., Osasco; Siemens Ltd., Richmond; Siemens Ltd., Bombay (51%); Siemens K.K. Tokyo (83%); Siemens Components (Advanced Technology) Sdn. Bhd., Malacca/Malaysia; Siemens Pakistan Engineering Co. Ltd., Karachi (64%); Siemens Componenets (Pte) Ltd. Singapore; Siemens Telecommunications Systems Ltd., Taipei (60%); Osram-Melco Ltd. Yokohama (51%); Siemens Ltd., Johannesburg (52%).

Further Reading

Face to Face with Technology, Berlin: Siemens Aktiengesellschaft, 1991.

Half Way There: Siemens, The Economist, July 4, 1992, p. 60.

Goodwin, Jack S., and Robert M. Fulmer, Management Development at Siemens Electronics: Hitting a Moving Target, Journal of Management Development, September 1992, pp. 40-46.

Hussain, Ahrar, SiemensA Tradition of Excellence, Economic Review, August 1994, p. 109.

Lineback, J. Robert, Siemens Braces for Rough Road Ahead, Electronic News, March 22, 1993, p. 18.

Miller, Karen Lowry, Siemens Shapes Up: So Long Plodding Perfectionism. Hello, Aggressiveness, Business Week, May 1, 1995, pp. 52-53.

Panni, Aziz, Sea Change at Siemens, Management Today, March 1994, p. 50.

Procassini, Andrew, Alliances and Opportunities, Electronic News, September 28, 1992, p. 8.

Schares, Gail E., Jonathan B. Levine, and Peter Coy, The New Generation at Siemens, Business Week, March 9, 1992, p. 46.

Scott J.D., Siemens Brothers, 1858 1958, Weidenfeld and Nicolson, 1959.

Siemens, Georg, History of the House of Siemens, trans, by A.F. Rodger and Lawrence N. Hold, Munich: Karl Alber, 1957.

Siemens, Werner von, Inventor and Entrepreneur: Recollections of Werner von Siemens, London: Lund Humphries, 1966.

Technical Opportunities Beckon in Eastern Europe, Design News, September 20, 1993, p. 250.

updated by Beth Watson Highman

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Siemens A.G.

Siemens A.G.

Wittelsbacherplatz 2
D-8000 Munich 2
Federal Republic of Germany
(89) 2 34 0

Public Company
Incorporated: 1966
Employees: 365,000
Sales: DM61.2 billion (US$34.51 billion)
Stock Index: Berlin Hamburg Dusseldorf Munich Brussels Paris Zurich Basel Geneva Amsterdam Vienna

Siemens A.G. is an electrical manufacturing giant and West Germanys leading technology concern. George Williamson of Fortune once wrote that second is best might as well be its motto, referring to the companys history of achieving success through well-engineered refinements of other peoples inventions. But opportunism is not the only interesting facet of Siemens history, which is also a story of a long family tradition and intimate involvement with some of the most important events of the 19th and 20th centuries.

Siemens & Halske was founded in Berlin in 1847 by Werner Siemens and J. G. Halske to manufacture and install telegraphic systems. Siemens, a former artillery officer in the Prussian army and an engineer who already owned a profitable patent for electroplating, was the driving force behind the company and remained so for the rest of his life. The company received its first major commission in 1848, when it contracted to build a telegraph link between Berlin and Frankfurt.

Construction of telegraph systems boomed in the mid-19th century and Siemens & Halske was well equipped to take advantage of the situation. In 1853, it received a commission to build an extensive telegraph system in Russia. Upon its completion, the company opened an office in St. Petersburg under the direction of Werner Siemens brother Carl Siemens. In 1857 Siemens & Halske helped develop the first successful deep-sea telegraphic cable. This led to the tansformation of the London office into an independent company under the direction of Wilhelm Siemens, another of Werners brothers, the next year. By 1865 the companys English operations had become substantial. Its name was changed to Siemens Brothers, still under the direction of Wilhelm, who was eventually knighted as Sir William Siemens.

In 1867 Siemens Brothers received a contract for an 11,000-kilometer telegraph line from London to Calcutta, which it completed in 1870. In 1871 it linked London and Teheran by telegraph. In 1874 Siemens Brothers launched its own cable-laying ship, the Faraday, which William Siemens codesigned. The next year, it laid the first direct transatlantic cable from Ireland to the United States.

In 1877 Alexander Graham Bells new telephones reached Berlin for the first time. Immediately grasping their worth, Werner Siemens quickly patented an improved version of the device and began production. In the next decade, Siemens & Halske also developed and began manufacturing electrical-lighting and power-generating equipment after Werner Siemens discovered the dynamo-electric principle in 1866..

In 1888 Werner Siemens was ennobled by the Germany kaiser for his achievements. Two years later he retired and his company became a limited partnership shared by his sons Arnold and Wilhelm and his brother Carl-Werner Siemens died in 1892. But the House of Siemens continued to prosper. That same year, Siemens & Halske built a power station at Erding in Bavaria and founded an American subsidiary, Siemens & Halske Electric Company, in Chicago. The latter, however, closed in 1904. In 1895 Wilhelm Conrad Roentgen discovered the X-ray, and the very next year Siemens & Halske owned the first patent for an X-ray tube. In 1897 Siemens & Halske decided to go public and reorganized with Carl Heinrich, now Carl von Siemens after being ennobled by the Russian czar in 1895, as chairman of the supervisory board. He retired after seven years in that post and was succeeded by his nephew Arnold.

Siemens & Halske remained busy as the 19th century gave way to the 20th. In 1903 it established Siemens-Schuckertwerke GmbH, a subsidiary devoted to electric power engineering. In 1909 Siemens & Halske developed an automatic telephone exchange serving 2,500 customers in Munich. But when World War I broke out, orders for civilian electrical equipment slowed considerably and the company began production of communications devices for the military. Siemens & Halske also produced explosives, gun locks for rifles, and, later in the war, aircraft engines.

But perhaps the companys most successful contribution to the German war effort was the fire control system it produced for the navys battlecruisers, which proved its worth at the Battle of Jutland in 1916. There, the battlecruiser squadron of the High Seas Fleet met its British counterpart for the only time during the war. While the main fleets fought to a draw, the German battlecruisers used their superior gunnery equipment to batter their opponents, sinking two British ships and severely damaging several others. It was a highlight for the German navy in a battle from which it otherwise won no advantage.

On the balance, however, the war hurt Siemens & Halske badly. The Bolshevik government that seized power in Russia in 1917 also seized the assets of the companys St. Petersburg subsidiary, which were worth about 50 million rubles. Siemens Brothers was taken over by the British government in 1915 and sold to British interests the next year. The company was not returned to the Siemens family after the armistice, although it retained their name for business purposes. Siemens Brothers eventually re-established links to its old parent and its general manager, Dr. Henry Wright, even became a member of the Siemens & Halske supervisory board in 1929. But Carl Friedrich von Siemens, a son of Werners who had headed the British subsidiary for six years and had many English friends, was shocked by these events. They have stolen our name, he was wont to lament.

Arnold von Siemens died in 1918, before the end of the war. He was succeeded by his brother Wilhelm, who died the next year. Carl Friedrich then became chairman. Despite the precarious state of the German economy in the 1920s and a bias among foreign customers against doing business with a German company, the company continued to make its mark in electrical manufacturing. In 1923 it started producing radio receivers for the consumer market. In the same year, recognizing the growing importance of Japan as an industrial power and not wishing to concede that market to General Electric and Westinghouse, Siemens & Halske set up a Tokyo subsidiary, Fusi Denk, later known as Fuji Electric. In 1925 Siemens began construction of a power station on the Shannon River in Ireland, and in 1927 the company began work on another hydroelectric power station for the Soviet government, near Zaporozhe. Back home in Germany, Siemens & Halske financed and produced a railway network in suburban Berlin that began operation in 1928. By the end of the decade, the company was accounting for one-third of the German electrical manufacturing industrys production and nearly the same proportion of its employees.

Siemens & Halske was bloodied by the Great Depression, but it survived. It was forced to halve its dividend in the early 1930s and lay off employees in large numbers, but remained on relatively sound financial footing until the Nazi governments rearmament project helped revive its fortunes in 1935. During the remainder of the decade, Siemens & Halske manufactured a wide range of equipment for all of Germanys armed services. One of its most significant technical contributions at this time, the development of an automatic-pilot system for airplanes, was the result of a project initiated for the Luftwaffe.

The companys activities during this time are difficult to evaluate. One the one hand, according to family historian Georg Siemens, Carl Friedrich von Siemens was repelled by the Nazis anti-Semitism from the start and only grew more disgusted with their goals and methods as time went on. Just before his death in 1941, he wrote to an assistant: ... my work no longer brings me satisfaction or joy. Those who were once proud that their work was devoted to the task of serving progress and humanity, can now only be sad that the results of their work merely serve the evil of destruction. Whenever I start to think, why, I should prefer to creep into a corner, so as not to see or hear any more. And yet there is no question that Siemens & Halske benefited from German rearmament during the late 1930s. Certainly the company did little or nothing to hinder Nazi militarism.

Carl Friedrich went into partial retirement in 1940 and appointed Hermann von Siemens, Arnolds eldest son, to succeed him. By this time, Siemens & Halske was devoting virtually all of its manufacturing capacity to military orders and would do so for the duration of the war. In 1944 it helped develop and manufacture the V-2 rocket. Its factories also suffered substantial damage from Allied bombing raids. And after the Soviet army conquered Berlin in 1945, Russian occupation authorities completely dismantled the Siemensstadt factory works and corporate headquarters.

In 1945 Hermann von Siemens, who had also been a director of Deutsche Bank, was arrested by American occupation authorities and interned for two years. There is also no question that the company employed slave labor during the war. Georg Siemens points out that every major German industrial concern used forced labor because of manpower shortages caused by the war, and asserts that Siemens & Halske treated its laborers better than most companies. But in 1947, allegations surfaced that three of the firms directors had been active in importing slave laborers from occupied countries. In addition, testimony from death camp survivors also surfaced at this time that Siemans had supplied gas chamber equipment to the concentration camps. These allegations were never proven, however, and the company denies them both.

Hermann von Siemens resumed the chairmanship upon his release in 1948. The company had been devastated by the war and required years of rebuilding to get back on its feet. Its corporate headquarters were relocated to Munich in 1949. By the early 1950s, Siemens & Halske was once again producing railroad, medical, telephone, and power-generating equipment, as well as consumer-electronics products. In 1954 it established an American subsidiary in New York, Siemens Inc. Its first product sold to the American market was an electron microscope. In the mid-1950s Siemens & Halske entered the burgeoning fields of data processing and nuclear power. It introduced its first mainframe computer in 1955 and its first nuclear reactor went into service in 1959 at Munich-Garching.

Hermann von Siemens retired in 1956 and was succeeded by Ernst von Siemens, Carl Friedrichs only son. In the mid-1960s, Siemens & Halske technology went to Mars after the company developed a disc-seal triode that was used in the transmitter of the American space probe Mariner IV. In 1965 it scored another coup when its 03 high-speed passenger train went into service with the German Federal Railway. And in 1968, it began constructing a nuclear power station at Atucha, Argentina, the first such facility in South America.

The company underwent a major reorganization in 1966, bringing all of its subsidiaries directly under control of the parent company and reincorporating as Siemens A.G. By the end of the decade, worldwide sales had reached DM10 billion; in 1970 they reached DM12.6 billion. In 1971 Ernst von Siemens retired and his cousin Peter succeeded him as chairman.

The 1970s were prosperous years for Siemens. Despite a slower worldwide economy that cut into customer orders in some areas and forced the company to cut its workforce, sales grew to DM20.7 billion and net profits to DM606 million in 1976. When the summer Olympic Games came to Munich in 1972, Siemens was its first official supplier of telecommunications and data-processing equipment. In 1977 the company entered into a joint venture with the American engineering firm Allis-Chalmers, called Siemens-Allis Inc., to market turbine generators in the United States. In fact, Siemens status as an electrical manufacturer rose to the point that Fortune wrote in 1978 that it had replaced Westinghouse in General Electrices demonology. Siemens had replaced Westinghouse as the worlds number-two electrical manufacturing concern, ranking as GEs major worldwide competitor in everything from motors and switchgear to generators and nuclear reactors. It had also raised its share of the West German mainframe computer market to 21%, cutting sharply into IBMs position as the Bundesrepubliks leading mainframe supplier.

In the late 1970s, Siemens stumbled when it initiated a research-and-development effort in microcircuit technology, against the advice of a consulting firm employed by the West German government to counsel the nations industrial companies. It was thought that Siemens slow and methodical practices would render it unable to keep up with the small, quick Silicon Valley firms that were breaking ground in this area. Nonetheless, Siemens A.G., with its research-and-development budget of $1 billion (one-eight of all the money spent by West German industry on research at the time), eventually entered into a joint venture with Dutch rival Philips to develop advanced microcircuits. None of the companys efforts on this front have been successful, however. Its components division lost money through 1987 and Siemens was forced to buy chips from Toshiba to meet its commitments until its own became available in early 1988.

In 1981 Peter von Siemens retired and was succeeded by Bernhard Plettner. For the first time, the Siemens family relinquished day-to-day control over the company it had founded over a century ago. But the 67-year-old Plettner had worked for Siemens for all of his adult life, and Peter von Siemens felt that his own son, at the age of 44, was still too young and inexperienced for the top job.

Under Plettner and new CEO Karlheinz Kaske, Siemens embarked on an expensive and ambitious program of acquisitions and research and development to try to make itself into a world leader in high-technology. Its effort to develop its own microchips was a part of that effort. So was the acquisition of IBMs struggling Rolm Systems subsidiary in 1988. That deal cost Siemens $844 million, but gave control of the third-largest supplier of PBX telephone switching equipment in North America. Siemens strategy during the 1980s was designed to pay off over the long term and produced few tangible benefits in the short run. The company spent $24 billion on both research-and-development and acquisitions between 1983 and 1988, and the tremendous cash drain produced both a significant drop in earnings and a cut in the dividend in 1988. As one analyst told Business Week in 1988, Siemens will be an interesting story in the 1990s. And Heribald Närger, who succeeded the retiring Bernhard Plettner as chairman in 1988, will have to see that the company actually writes that story.

It appears that direct control of Siemens A.G. has finally slipped away from the family whose name it bears. The only family member who appears in the 1988 annual report is Ernst von Siemens, Werners 84-year-old grandson, whose place on the supervisory board is purely honorary. But the history of Siemens is still essentially that of the Siemens family. Werner von Siemens, scion of a family that made a marginal living farming wheat on the slopes of the Harz mountains, once wrote in a letter to his brother Carl Heinrich: From my young days it has always been my ambition to found a business of international repute. In this he certainly succeeded.

Principal Subidiaries:

Osram GmbH; Dr.-Ing. Rudolf Hell GmbH; Vacuumschmelze GmbH; Reaktor-Brennele-ment Union GmbH, (60%); Interatom GmbH; Heimann GmbH; Rofin-Sinar Laser GmbH; NRG Nuklearrohr-Gesellschaft mbH; Siemens Finanzierungsgesellschaft für Informationstechnik mbH; Sietec Siemens-Systemtechnik und Portfolio GmbH & Co. OHG; Siemensstadt-Grundstücksverwaltung GmbH & Co. OHG; Siemens Beteiligungen AG, (Switzerland); Siemens S.A., (Brussels); ATEA N.V., Herentals (Belgium) (80%); Siemens A/S, Ballerup (Denmark); Siemens Osakeyhtiö, (Finland); Siemens S.A., St. Denis (France); Bendix Electronics S.A., (France); Siemens A.E., Elektrotechnische Projekte und Erzeugnisse, (Greece); Siemens Ltd., Sunbury-on-Thames (U.K.); Siemens Ltd., (Ireland); Siemens Telecomunicazioni S.p.A., Cologno Monzese (Italy) (65%); Siemens S.p.A., (Italy); Siemens Neder-land N.V., (the Netherlands); Siemens A/S, (Norway); Siemens AG Österreich, (Austria) (74%); Siemens S.A., (Portugal); Siemens-Elema AB, Solna (Sweden); Siemens AB, (Sweden); Siemens-Albis AG, (Switzerland) (78%); Siemens S.A., (Spain) (93%); Etmas-Elektrik Tesisat ve Mühendislik A.S., (Turkey) (51%); Türk Siemens Kablo ve Elektrik Sanayii A.S., (Turkey) (55%); Osram S.A., Molsheim (France); Osram Società Riunite Osram Edison-Clerici S.p.A., (Italy); Osram S.A., (Spain) (90%); Siemens Corporation (USA); Siemens-Bendix Automotive Electronics L.P. (USA); Siemens-Bendix Automotive Electronics Ltd. (Canada); Siemens Electric Ltd., Pointe Claire (Canada); Equitel S.A., (Argentina); Siemens S.A.I.C.F.l.yM. (Argentina); Siemens S.A., (Brazil) (84%); Siemens S.A. (Colombia) (79%); Siemens S.A. de C.V. (Mexico); Siemens S.A. (Venezuela); Osram Argentina S.A.C.I. (66%); Osram do Brasil-Companhia de lâmpadas Elétrocas S.A. (Brazil); Osram S.A. de C.V., Naucalpan (Mexico);Siemens Western Finance N.V., Willemstad (Curacao); Siemens Ltd. (India) (51%); Siemens K.K. (Japan) (83%); Siemens Components (Advanced Technology) Sdn. Bhd. (Malaysia); Siemens Pakistan Engineering Co. Ltd. (Pakistan) (64%); Siemens Components (Pte) Ltd. (Singapore); Taicom Systems Ltd. (Taiwan) (55%); Siemens Ltd. (South Africa) (52%); Siemens Ltd. (Australia).

Further Reading:

Siemens, Georg (trans. A. F. Rodger and Lawrence N. Hole). History of the House of Siemens, Munich, Karl Alber, 1957; Scott J.D. Siemens Brothers, 1858-1958, Weidenfeld and Nicolson, 1959; Siemens, Werner von. Inventor and Entrepreneur: Recollections of Werner von Siemens, London, Lund Humphries, 1966.

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Siemens AG

Siemens AG A German-based engineering conglomerate. It produces both hardware and software, and acts as a systems integrator. It is active in a wide range of markets and, through the jointly owned Fujitsu Siemens Computers (Holding) BV, is a substantial producer of computer hardware.

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Siemens AG

Siemens AG

founded: 1966



Contact Information:

headquarters: wittelsbacherplatz 2, d-80333
munich, germany phone: 49-89-234-0000 fax: 49-89-234-4242 url: http://www.siemens.com

OVERVIEW

Siemens AG, headquartered in Munich, Germany, is a large and diversified company with a network of more than 400 companies and over 450,000 employees located in 190 countries. Specializing in electronics and electrical engineering, the company is organized into 14 business groups within 7 business segments: Information and Communication, Automation and Control, Power, Transportation, Medical, Lighting, and Financial and Real Estate. Information and Communications is comprised of three groups: Information and Communications Networks (ICN), Information and Communications Mobile (ICM), and Siemens Business Services (SBS). Automation and Control contains four groups: Automation and Drives (A&D), Industrial Solutions and Services (I&S), Siemens Dematic (SD), and Siemens Building Technologies (SBT). The Power business segment contains two groups: Power Generation (PG) and Power Transmission and Distribution (PTD). The Transportation segment is comprised of Transportation Systems (TS) and Siemens VDO Automotive (SV). Other segments are Medical Solutions; Lighting, which does business as Osram; and Siemens Financial Services.

After a banner year in 2000 in which Siemens rode the wave of an explosion in the mobile telecommunications market, the company was roughed up during 2001 as the mobile phone and semiconductor business suddenly dried up. Siemens, who had invested in the U.S. market heavily since 1997, was hit hard by the dissolution of the U.S. economy after the terrorist attacks on New York and Washington, D.C. in September of 2001.

COMPANY FINANCES

In fiscal 2001, ending September 31, 2001, Siemens posted a net income of 2.1 billion euro on 87 billion euro in net sales, down from a net income of 8.9 billion euro on 77.5 billion euro in fiscal 2000. (Average currency exchange rate for fiscal 2001: 1.09 euro = $1.) However, the fiscal 2000 profits were significantly inflated due to substantial divestments made during the year. Siemens' bottom line in 2001 was adversely affected by its 50 percent interest in the computer chip company Infineon, which recorded a profit of 1.2 billion euro in 2000 but posted a loss of 591 million euro in 2001. Additionally, the company incurred 1.9 billion euro in restructuring charges and asset write-downs during the year. Siemens' Operations (i.e., core business segments of Information and Communication, Automation and Control, Power, Transportation, Medical, and Lighting) posted earnings before interest, taxes, and amortization (EBITA) of 1.3 billion euro in fiscal 2001. In fiscal 2000 EBITA was 2.8 billion euro; however, if the 1.9 billion euro in restructuring and write-down of assets is removed from the equation, EBITA from Operations in fiscal 2001 jumps to 3.2 billion euro, an increase of 400 million euro over the previous fiscal year.

During fiscal 2001, Siemens' stock posted a high per share price of $80 on the New York Stock Exchange on May 2, and low per share price of $32.52 on September 21, closing the fiscal year at $38.40. Prices began to rebound during the first two quarters of fiscal 2002, posting a high of $70.48 per share on January 9, closing the second quarter on March 28 at $65.85.

During the first quarter of 2002, ending December 31, 2001, Siemens generated sales of 21 billion euro, up slightly from 20.5 billion euro posted during the same period in fiscal 2001. However, year-on-year net income was down almost half from 1 billion euro in fiscal 2001 to 538 million euro in 2001 due to increased cost of sales and over 100 percent increase in contract orders in the Transportation group.




ANALYSTS' OPINIONS

Because Siemens is such a large conglomeration of companies and interests, analysts tend to use a sumof-the-part methodology. Examining each of the 14 business groups separately, analysts then total the overall positive or negative impact of all the units combined. In fiscal 2002 most advisors remained neutral toward Siemen's prospects for upcoming performance as positive and negative factors tended to cancel out each other. The most commonly expressed concern focused on Information and Communications. As a result of the sluggish economy especially in the United States, ICN posted a year-on-year decline in sales of 13 percent for the first quarter of fiscal 2002, and analysts suggest a need for further restructuring in this segment.

Profitability in PG was well ahead of analysts' predictions for fiscal 2001, and PTD greatly increased its number of orders, which will eventually translate into increased revenues as long-term orders are filled. However, analysts warn that the power generation market is at a peak and will likely fall off in the foreseeable future. Segments of Automation and Control also performed well in fiscal 2001, and analysts expect the divisions to continue post positive numbers. Medical Solutions is the group seen as having the most potential for significant growth in the future.



HISTORY

In 1847 Warner Siemens and J. G. Halske formed Siemens & Halske in Berlin to produce and install telegraph systems. By 1853 the company was prospering as it benefited from a burst of activity in the communications industry. In 1867 Siemens & Halske received a contract to build a telegraph line between London and Calcutta, totaling 11,000 miles. Three years later the job was complete and the first telegraph message was relayed between London and Calcutta. Through the remainder of the 1800s, innovation followed innovation. In 1875 the company laid the first transatlantic cable, connecting Ireland and the United States. The following year it built the first electric power transmission system in Europe. The next year Siemens patented an improved version of Alexander Graham Bell's telephone. The company built one of the world's first electric elevators in 1880 and produced its first electric trolley car in 1882.

Into the early twentieth century Siemens & Halske remained busy; however at the onset of World War I, orders for the organization's various products and services dropped off and the company retooled to manufacture war-related items, such as military communication devices as well as explosives and airplane engines. The company also provided the German Navy with an advanced fire control system that was instrumental in the sinking of at least two British ships. After the war Siemens & Halske continued to build its influence in electrical engineering. By 1930 the company supplied one third of Germany's electrical manufacturing industry.

Having survived the Great Depression by cutting costs and laying off significant numbers of employees, Siemens & Halske was revitalized by the onset of World War II. Once again the company turned its attention to military products, including the design and production of an automatic pilot system for airplanes and the V 2 rocket. Siemens & Halske's involvement in the Nazi's activities is somewhat unclear. Although Carl Friedrich von Siemens, then head of the company, was quoted as being disgusted by the Nazi's anti-Semitism, without a doubt Siemens & Halske benefited from the war due to increased business and the use of slave labor, a practice employed by many German manufacturers at the time. The company was also accused of importing slave labor from occupied territories and providing the Nazis with gas chamber equipment. The charges, which were never substantiated, were denied by Siemens & Halske.

FAST FACTS: About Siemens AG


Ownership: Siemens AG is an international publicly traded company that is listed on numerous stock exchanges including Amsterdam, Brussels, Dusseldorf, Frankfurt, Geneva, New York, Paris, Vienna, and Zurich.

Ticker Symbol: SI

Officers: Karl-Hermann Baumann, M.D., Chmn., 66; Heinrich von Pierer, M.D., Pres. and CEO, 60; Heins-Joachim Neuburger, CFO, 48

Employees: 477,100

Principal Subsidiary Companies: As Europe's largest electrical and electronics company, Siemens AG has more than 400 production sites in 40 countries. Its wide array of subsidiaries are located around the globe, including Paris, London, New York, Tokyo, Bombay, Madrid, Zurich, Athens, and Brussels.

Chief Competitors: Siemens generates the third highest revenues worldwide in its industry, behind General Electric and IBM, respectively. Two Japanese companies, Matsushita and Hitachi occupy the fourth and fifth spots on the revenue ladder. Other lesser competitors include Hewlett Packard, Toshiba, and Fujitsu.




After recouping from damages and losses suffered during the war, Siemens & Halske refocused on its railroad, medical, telephone, and power generation businesses. With offices already in the United Kingdom, Russia, and Japan, in 1954 Siemens & Halske opened an office in New York. At the same time, the company expanded into the new field of computers, producing its first mainframe in 1955. Growing rapidly in numerous fields and markets, the company decided to reorganize in 1966. All businesses entities became subsidiaries of the new parent company, Siemens AG. During the 1970s the newly restructured company continued to expand its businesses and increase its revenues. During the late 1970s an unsuccessful and costly attempt was made to enter the microchip business. Despite an influx of $1 billion for research and development, Siemens fell behind in both research and production and had to buy chips from another vendor to fill its orders.

During the 1980s the company dedicated massive amounts of money to acquisitions and research, spending $24 billion between 1983 and 1988. A new era for Siemens was marked in 1992 when Dr. Heinrich von Pierer was named as head of the company. Von Pierer brought a new mentality of global vision, and he set out to upend the slow, methodical, and process-laden system of manufacturing traditional to German culture. He cut costs, pushed into new markets including Asia and an increased presence in the United States, and encouraged his management team to be innovative and aggressive. The strategy paid off; by 1994 Siemens AG was Germany's third-largest public corporation and the third-largest manufacturer of electrical products and power generation systems. The company continued to post positive numbers until an already slow economy in 2001 was decimated by the events of September 11.




STRATEGY

Siemens set its strategy by assigning goals for growth in profitability to each of its operational groups through steady and measurable progress. Siemens' pri-mary method of tracking success is by looking at its economic value added (EVA). EVA measures the difference between return and cost. To motivate management leaders to achieve goals, incentive pay is tied directly to EVA. Impacted by a sharp decline in the telecommunication industry, as well as the overall economy, Siemens developed "Operation 2003," a plan that will drive the company toward its medium-range goals in spite of a hostile economic environment. Because significant growth is not expected to come from increase revenues from sales, the fundamental strategy for Operation 2003 is to reduce costs in a variety of areas. Operations will be targeted for streamlining, employee numbers will be cut by up to 17,000, and corporate spending will be reduced by 15 percent. U.S. operations, which were deeply affected by the downturn in the economy in the second half of 2001, are specifically targeted for increased profit return.

In the continually evolving process of diversifying and acquiring new business interests, Siemens made a significant transaction in 2001 when it began to divest itself of Infineon. In fiscal 2000 the Munich-based chip-maker posted a net income of 1.1 billion euro; in fiscal 2001 the company posted a net loss of 591 million euro as the semiconductor market fell off drastically. Although Infineon was spun off as a separate company in 2000, Siemens retained just over 50 percent. By the end of 2001 Siemens had reduced its interest in the company to 41.4 percent, and stated intentions to continue to divest of the floundering company. In addition, in March of 2002 Siemens announced that it would divest itself of approximately 50 low-performing companies.

CHRONOLOGY: Key Dates for Siemens


1847:

Werner Siemens and J. G. Halske found Siemens & Halske in Berlin to manufacture and install telegraphy systems

1857:

Receives a major contract to establish a telegraph system in Russia

1867:

Lays 11,000 miles of telegraph line, connecting London and Calcutta, India

1875:

Lays the first transatlantic cable from Ireland to the United States

1909:

Develops and installs first automatic telephone exchange

1914:

Shifts focus to military contracts during World War I

1930:

Provides one-third of all Germany's electrical manufacturing capacity

1941:

Focuses once again on military contract during the war years

1954:

Establishes a U.S.-based subsidiary to manufacture electron microscopes

1966:

Reorganizes as Siemens AG, bringing all its subsidiaries under its umbrella

1978:

Becomes second largest manufacturer of electrical equipment in the world

1992:

Establishes a $16 million research and development laboratory in New Jersey

2000:

Announces plans to invest $1.5 billion by 2003 to expand its operations in Asia; annual sales top $67.5 billion with a world-wide workforce of 447,000




INFLUENCES

Numerous factors influence the performance of Siemens as a whole and the profitability of individual business areas. The Information and Communications segment is primarily affected by two factors. First, it operates in a highly competitive market of electronics and communications and is thereby subject to the trends in pricing and volatile markets. During fiscal 2001, price pressure and a depressed market were apparent in semiconductors, telecommunications, and automobile production. Second, because Siemens works on the cutting edge of highly advance technology, the company must invest heavily in research and design. Some research may not evolve into a viable product, or the product may not prove to be marketable.

Because a significant portion of Siemens' business is tied to long-term fixed price contracts, the company may be either positively or negatively affected by actual productivity and production costs. Cost overruns can negate profitability, and coming in under expected costs can increase estimated profits. Also, Siemens often relies heavily on third parties to supply parts or assemble products. If a third party fails to meet its obligations, Siemens may be unable to meet its own commitments. Also because the company operates around the world, it is subject to trends in currency exchange, which can result in either expanded or decreased value.



CURRENT TRENDS

To survive and prosper in a highly competitive industry, Siemens has moved to distinguish itself from its competitors by moving beyond simply offering products and services to providing comprehensive solutions to its customers' problems. By combining products, systems, and services into an integrated package, Siemens hopes to offer what its competitors cannot: a total package that provides customers with a complete and integrated answer to their needs, from design to installation to management. For example, Medical Solutions not only provides cutting edge technology in state of the art medical systems used in diagnosis and therapy, but also includes options for professional consulting services, technology systems for clinical and administration use, and remote processing services.

Another trend has been the significant increase in Siemens' presence in the United States. Between 1997 and 2002, Siemens invested $9 billion in U.S.-based acquisitions, making the United States Siemens' largest single market. In March of 2001 Siemens cross-listed 12 percent of its shares on the New York Stock Exchange and established a headquarters in New York. The company also invested in an advertising campaign and sponsored the U.S. Open in order to gain exposure in the United States.



PRODUCTS

Siemens' Information and Communications segment focuses on next-generation Internet, wireless communications, and advanced electronics. One of the largest producers in the world of mobile phone handsets, Siemens provides a wide range of products, services, and solutions in innovative voice, data, and video communications devices. ICN develops and markets communication systems to the public and private sectors; ICM designs, manufactures, and markets mobile network devices, such as mobile and cordless phones and radio base stations; and SBS designs, builds, and sells information and communications systems to business in sectors such as industry, transport, and utilities.

Automation and Control focuses on products and services that optimize production, cost efficiency, and productivity. A&D products and services include low voltage control and installation technology, manufacturing automation, drive systems, and process automation; I&S provides advanced electronic products and services designed to improve infrastructure facilities throughout the entire life cycle of the facilities; SD designs, produces, and markets factory automation and logistics automation equipment; and SBT provides products and services related to monitoring and maintenance of temperature, safety, electricity, lighting, and security for commercial and industrial properties.

SAY CHEESE

Siemens has developed a real-time 3D and color face-recognition camera that provides advances in the accuracy, speed, and lower cost. The device used cutting edge technology to generate 3D images by determining coordinates of scene points by intersecting lines of view of a standard color camera which combines with planes of light generated by a slide projector. Image acquisition rate is up to 12 images per second and a distance accuracy of 1 millimeter to 1 meter. Siemens expects that the new camera will revolutionize face-recognition technology, making it decisively accurate (up to 100 percent) and widely used for such applications as airport security.




Siemens' Power segment provides a full range of power generation, transmission, and distribution. PG offers power plant technology, including production of key components and power plant design and construction; PTD provides equipment, systems, and services that assist in moving electrical power from generation point to consumer destination, including power system controls, transformers, and high voltage products. Within Transportation, STS specializes in the rail industry, producing heavy rails, locomotives, and trains as well as associated services; SV manufactures and sells electrical and electronic systems and devices used in automobiles, including powertrain safety, chassis communication, multimedia, and cockpit controls.

Siemens' Medical Solution researches, designs, and develops high-tech medical products and services related to diagnosis and treatment. Products include medical imaging systems and electromedical systems such as patient monitoring equipment and life support systems. Osram develops and markets lighting sources and controls, including general lighting products, automobile lighting, special photo-optic lamps, and display lighting. The Financial and Real Estate group operates as Siemens Financial Services GmbH, which specializes in corporate financing, risk management, investment financing, fund management and insurance services.



CORPORATE CITIZENSHIP

Siemens' environmental policy operations on the concept of sustainability. Through careful use of natural resources and with a constant eye for the ecological impact during the life cycle of any given product, Siemens is committed to achieving zero pollution if at all possible, and if not, then reducing the impact to the environment as much as possible. Along with regulation requirements imposed by numerous governments and agencies, Siemens maintains ongoing in-house environmental standards and objectives that are routinely assessed.

Key aspects to Siemens' citizenship goals include learning and research, public welfare, and arts and culture. Siemens works with schools, colleges, and university both in Germany and around the world to promote interaction between research and industry. The company sponsors numerous learning and scholarship programs aimed at generating interest in technology. Concerning public welfare, Siemens focuses its community initiative on education and training to help alleviate the underlying problems of poverty. The company attempts to offer assistance on a local level, specific to local needs. Siemens also promotes the arts by supporting museums and artists through private foundations as well as through the Siemens Arts Program.



GLOBAL PRESENCE

Operating through hundreds of companies in 140 countries around the world, Siemens is truly an international company. Employees are primarily located in Europe, with 199,000 in Germany and 118,000 in other European countries. The Americas has 107,000 Siemens employees; the Asia-Pacific has 53,000; and Africa and the Middle East have 7,000. The United States is Siemens' single largest market, accounting for over half of PG and Medical sales worldwide, as well as over 40 percent of SD and Osram sales. Much of Siemens' business is conducted in Europe with a strong market for ICM in the Asia-Pacific region. In all, during fiscal 2001 sales by region were as follows: Germany, 22 percent; Europe excluding Germany, 30 percent; The Americas, 30 percent; Asia-Pacific, 13 percent; and Africa/Middle East, 5 percent.



EMPLOYMENT

Of the 450,000 persons employed by Siemens during fiscal 2001, 191,900 worked in manufacturing jobs; 143,200 worked in sales and marketing; 58,800 worked in administration; and 56,100 worked in research and development. Distribution of employees worldwide is as follows: 42 percent in Germany; 25 percent in Europe excluding Germany; 22 percent in the Americas; 11 percent in the Asia-Pacific; and 1 percent in Africa/Middle East. Of all employees, 38 percent had a college degree, and of that total, 78 percent received their education in the fields of natural science or technology. In fiscal 2001, Siemens spent 500 million euro on employee training and apprenticeships. The single most important area for staff recruitment is in research and development. Because much of the company's success depends on the development of highly advanced, innovative technology, Siemens actively recruits the best and brightest prospects for its research and development positions.



SOURCES OF INFORMATION

Bibliography

aston, adam. "he's putting siemens on the american map." business week, 4 february 2002.

grant, tina, ed. international directory of company histories. vol. 14. detroit: st. james press, 1996.

karnitschnig, matthew. "siemens stages turnaround as profit beats forecasts—sale of infineon stake boosts net to $477 million; outlook is still clouded." the wall street journal, 24 january 2002.

kueppers, alfred. "siemens posts losses, shuffles management in ailing tech unit." the wall street journal, 15 november 2001.

mchugh, david. "siemens reduces stake in chip maker infi-neon to 41.4 percent, selling 40 million shares." ap newswire, 8 january 2002.

pringle, david. "spending by china mobile-phone operators will be cut as slump in demand spreads." the wall street journal, 29 march 2002.

siemens ag home page, 2002. available at http://www.siemens.

uniworld business publications, inc. directory of foreign firms operating in the united states. new york: author, 2000.

For an annual report:

on the internet at: http://www.siemens.com


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. siemens ag's primary sics are:

1731 electrical work

3511 turbines and turbine generator sets

3519 internal combustion engines, not elsewhere classified

3531 construction machinery

also investigate companies by their north american industrial classification system codes, also known as naics codes. siemens ag's primary naics codes are:

235310 electrical contractors

333120 construction machinery manufacturing

333131 mining machinery and equipment manufacturing

333298 all other industrial manufacturing

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