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9/19/2005
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Siemens Discloses Cuts In IT Services Unit

Company will eliminate 2,400 jobs in Germany as part of its effort to cut operating costs by $1.82 billion by fiscal 2007.

Berlin-based electronics and engineering company Siemens AG on Monday revealed a major restructuring of its money-losing Siemens Business Services unit, which primarily provides IT and business-process services for enterprise customers in Europe and worldwide. Siemens also is shaking up its Communications group and dissolving its Logistics and Assembly unit.

As part of an effort to trim its operating costs by $1.82 billion by fiscal 2007, Siemens Business Services will cut 2,400 staff positions in Germany, where it employs about 15,000 workers. Additionally, unit head Adrian Hammerstein is stepping down "by his own request," according to a company statement. He's being replaced by Christopher Kollatz, who has held a number of executive positions at Siemens AG.

As part of the changes, Siemens Business Services will also subcontract all PC maintenance work outside of Germany. Siemens Business Services holds IT services contracts with a number of major Western European customers. It recently signed a deal under which it will work with Microsoft to build an integrated enterprise communications system for the United Kingdom's BBC television and radio network.

In the United States, Siemens Business Services has a small but growing IT services business. "It's too early to say" how the reorganization will affect the group's U.S. operations, a spokesman says.

The spokesman also says the timing of the job cuts announcement is unrelated to the results of Sunday's national election in Germany. Many business leaders were disappointed that Christian Democrat head Angela Merkel, who ran on a pro-business, pro-growth agenda, was unable to win a convincing victory over incumbent Gerhard Schroeder's Social Democrats. Many in business now fear a continuance of Germany's labor-friendly policies, which have led a number of companies in the country to cut jobs domestically and relocate them to offshore locations. Germany's unemployment rate is consistently among Europe's highest.

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