e20vf
As filed with the Securities and Exchange Commission on
December 2, 2010
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 20-F
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o
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REGISTRATION STATEMENT PURSUANT
TO SECTION 12(b) OR(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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þ
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the fiscal
year ended September 30, 2010
OR
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o
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period
from
to
OR
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o
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SHELL COMPANY REPORT PURSUANT
TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this
shell company
report
Commission file
number: 1-15174
Siemens
Aktiengesellschaft
Wittelsbacherplatz 2
D-80333 Munich
Federal Republic of Germany
Telephone: +49
(89) 636-00
Securities registered or to be registered pursuant to
Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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American Depositary Shares, each representing one
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Common Share, no par value
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New York Stock Exchange
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Common Shares, no par value*
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New York Stock Exchange
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*
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Listed, not for trading or
quotation purposes, but only in connection with the registration
of American Depositary Shares pursuant to the requirements of
the Securities and Exchange Commission.
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Securities registered
or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which
there is a reporting obligation pursuant to Section 15(d)
of the Act: None
The number of
outstanding shares of each of the issuers classes of
capital or common stock as of September 30, 2010:
869,837,005 common shares, no par value.
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes o No þ
If this report is an
annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o No þ
Indicate by check mark
whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes þ No o Not
applicable o
Indicate by check mark
whether the registrant has submitted electronically and posted
on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T
(§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes o No o
Indicate by check mark
whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this
filing:
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U.S.
GAAP o
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International Financial Reporting Standards as issued
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Other o
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by the International Accounting Standards
Board þ
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If Other
has been checked in response to the previous question, indicate
by check mark which financial statement item the registrant has
elected to follow.
Item 17 o
Item 18 o
If this is an annual
report, indicate by check mark whether the registrant is a shell
company (as defined in
Rule 12b-2
of the Exchange Act).
Yes o No þ
FORWARD
LOOKING STATEMENTS
This
Form 20-F
contains forward-looking statements and information
that is, statements related to future, not past, events. These
statements may be identified by words such as
expects, looks forward to,
anticipates, intends, plans,
believes, seeks, estimates,
will, project or words of similar
meaning. Such statements are based on the current expectations
and certain assumptions of Siemens management, and are,
therefore, subject to certain risks and uncertainties. A variety
of factors, many of which are beyond Siemens control,
affect Siemens operations, performance, business strategy
and results and could cause the actual results, performance or
achievements of Siemens to be materially different from any
future results, performance or achievements that may be
expressed or implied by such forward-looking statements. In
particular, Siemens is strongly affected by changes in general
economic and business conditions as these directly impact its
processes, customers and suppliers. This may negatively impact
our revenue development and the realization of greater capacity
utilization as a result of growth. Yet due to their diversity,
not all of Siemens businesses are equally affected by
changes in economic conditions; considerable differences exist
in the timing and magnitude of the effects of such changes. This
effect is amplified by the fact that, as a global company,
Siemens is active in countries with economies that vary widely
in terms of growth rate. Uncertainties arise from, among other
things, the risk of customers delaying the conversion of
recognized orders into revenue or cancellations of recognized
orders, of prices declining as a result of continued adverse
market conditions by more than is currently anticipated by
Siemens management or of functional costs increasing in
anticipation of growth that is not realized as expected. Other
factors that may cause Siemens results to deviate from
expectations include developments in the financial markets,
including fluctuations in interest and exchange rates (in
particular in relation to the U.S. dollar), in commodity
and equity prices, in debt prices (credit spreads) and in the
value of financial assets generally. Any changes in interest
rates or other assumptions used in calculating pension
obligations may impact Siemens defined benefit obligations
and the anticipated performance of pension plan assets resulting
in unexpected changes in the funded status of Siemens
pension and post-employment benefit plans. Any increase in
market volatility, further deterioration in the capital markets,
decline in the conditions for the credit business, continued
uncertainty related to the subprime, financial market and
liquidity crises, or fluctuations in the future financial
performance of the major industries served by Siemens may have
unexpected effects on Siemens results. Furthermore,
Siemens faces risks and uncertainties in connection with certain
strategic reorientation measures; the performance of its equity
interests and strategic alliances; the challenge of integrating
major acquisitions and implementing joint ventures and other
significant portfolio measures; the introduction of competing
products or technologies by other companies or market entries by
new competitors; changing competitive dynamics (particularly in
developing markets); the risk that new products or services will
not be accepted by customers targeted by Siemens; changes in
business strategy; the outcome of pending investigations, legal
proceedings and actions resulting from the findings of, or
related to the subject matter of, such investigations; the
potential impact of such investigations and proceedings on
Siemens business, including its relationships with
governments and other customers; the potential impact of such
matters on Siemens financial statements, and various other
factors. More detailed information about certain of the risk
factors affecting Siemens is contained throughout this report
and in Siemens other filings with the SEC, which are
available on the Siemens website, www.siemens.com, and on the
SECs website, www.sec.gov. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described in the relevant forward-looking statement
as expected, anticipated, intended, planned, believed, sought,
estimated or projected. Siemens neither intends to, nor assumes
any obligation to, update or revise these forward-looking
statements in light of developments which differ from those
anticipated.
In this
Form 20-F,
references to we, us, our,
Company, Siemens or Siemens
AG are to Siemens Aktiengesellschaft and, unless the
context otherwise requires, to its consolidated subsidiaries.
Throughout this annual report, whenever a reference is made to
our Companys website, such reference does not incorporate
information from the website by reference into this annual
report.
i
[THIS PAGE INTENTIONALLY LEFT BLANK]
iv
PART I
ITEM 1:
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2:
OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3:
KEY INFORMATION
Selected
consolidated financial and statistical data
The accompanying Consolidated Financial Statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS), as adopted by the European Union (EU). The
financial statements are also in accordance with IFRS as issued
by the IASB. Certain pronouncements have been early adopted, see
Notes to Consolidated Financial Statements. Until
fiscal year end 2006, our primary financial reporting was
prepared in accordance with United States Generally Accepted
Accounting Principles (U.S. GAAP).
We have presented the selected financial data below as of and
for each of the years in the five-year period ended
September 30, 2010 in accordance with IFRS. For fiscal
years 2010 to 2007, we present our Consolidated Financial
Statements prepared in accordance with IFRS. In addition, we
published our first IFRS Consolidated Financial Statements for
fiscal years 2006 and 2005 as supplemental information in
December 2006. The IFRS selected financial data set forth below
should be read in conjunction with, and are qualified in their
entirety by reference to, the Consolidated Financial Statements
and the Notes thereto presented elsewhere in this document.
We have also presented the selected financial data below as of
and for each of the years in the two-year period ended
September 30, 2007 in accordance with U.S. GAAP. For
fiscal years 2010, 2009 and 2008, Siemens is not required to
prepare and present financial data in accordance with
U.S. GAAP. For fiscal years 2007 and 2006, the selected
financial data has been derived from a reconciliation of our
IFRS Consolidated Financial Statements to U.S. GAAP.
1
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Year ended September 30,
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Income statement data
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2010(1)
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2009(1)
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2008(1)
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2007(1)
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2006(1)
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(in millions of , except per share data)
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Amounts in accordance with IFRS:
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Revenue
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75,978
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76,651
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77,327
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72,448
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66,487
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Income from continuing operations before income taxes
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5,811
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3,891
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2,874
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5,101
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3,418
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Income from continuing operations
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4,112
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2,457
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1,859
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3,909
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2,642
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Income (loss) from discontinued operations, net of income taxes
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(44
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40
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4,027
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129
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703
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Net income
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4,068
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2,497
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5,886
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4,038
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3,345
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Basic earnings per share
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Income from continuing operations
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4.54
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2.60
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1.91
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4.13
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2.78
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Income (loss) from discontinued operations
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(0.05
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0.05
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4.50
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0.11
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0.74
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Net income
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4.49
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2.65
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6.41
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4.24
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3.52
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Diluted earnings per share
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Income from continuing operations
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4.49
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2.58
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1.90
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3.99
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2.77
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Income (loss) from discontinued operations
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(0.05
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0.05
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4.49
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0.11
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0.74
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Net income
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4.44
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2.63
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6.39
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4.10
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3.51
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Year ended September 30,
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2010(1)
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2009(1)
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2008(1)
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2007(1)
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2006(1)
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(in millions of , except per share data)
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Amounts in accordance with U.S. GAAP:
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Net sales
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N/A
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N/A
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N/A
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78,890
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77,559
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Income from continuing operations before income taxes
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N/A
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N/A
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N/A
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3,250
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3,728
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Income from continuing operations, net of income taxes
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N/A
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N/A
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N/A
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2,064
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2,650
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Income (loss) from discontinued operations, net of income taxes
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N/A
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N/A
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N/A
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353
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393
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Net income
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N/A
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N/A
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N/A
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2,417
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3,043
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Basic earnings per share
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Income from continuing operations
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N/A
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N/A
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N/A
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2.30
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2.97
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Income (loss) from discontinued operations
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N/A
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N/A
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N/A
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0.39
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0.45
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Net income
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N/A
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N/A
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N/A
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2.69
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3.42
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Diluted earnings per share
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Income from continuing operations
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N/A
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N/A
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N/A
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2.29
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2.85
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Income (loss) from discontinued operations
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N/A
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N/A
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N/A
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0.39
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0.42
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Net income
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N/A
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N/A
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N/A
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2.68
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3.27
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2
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At September 30,
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Balance sheet data
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2010
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2009
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2008
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2007
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2006
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(in millions of )
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Amounts in accordance with IFRS:
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Total assets
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102,827
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94,926
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94,463
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91,555
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87,528
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Long-term debt
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17,497
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18,940
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14,260
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9,860
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13,122
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Total equity
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29,096
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27,287
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27,380
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29,627
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25,895
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Common stock
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2,743
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2,743
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2,743
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2,743
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2,673
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Amounts in accordance with U.S. GAAP:
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Total assets
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N/A
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N/A
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N/A
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93,470
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90,770
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Long-term debt
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N/A
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N/A
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N/A
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9,853
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13,399
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Shareholders equity
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N/A
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N/A
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N/A
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30,379
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28,926
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Common stock
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N/A
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N/A
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N/A
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2,743
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2,673
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(1) |
Under IFRS, the historical results of the former segments
Communications (Com) and Siemens VDO Automotive (SV) are
reported as discontinued operations in the Companys
Consolidated Statements of Income for all periods presented and
the assets and liabilities were classified on the balance sheet
as held for disposal. For further information see Notes to
Consolidated Financial Statements.
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The number of shares outstanding at September 30, 2010,
2009, 2008, 2007 and 2006 was 869,837,005; 866,425,760;
861,557,756; 914,203,038 and 891,086,826, respectively.
Dividends
The following table sets forth in euros and in U.S. dollars
the dividend paid per share for the years ended
September 30, 2006, 2007, 2008, 2009 and the proposed
dividend per share for the year ended September 30, 2010.
Owners of our shares who are United States residents should be
aware that they will be subject to German withholding tax on
dividends received. See Item 10: Additional
information Taxation.
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Dividend paid
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per share
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Year ended September 30,
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Euro
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U.S. dollar
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2006
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1.45
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1.88
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2007
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1.60
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2.36
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2008
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1.60
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2.11
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2009
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1.60
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2.25
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2010
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2.70
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(1)
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(1) |
Proposed by the Managing Board and the Supervisory Board; to be
approved by the shareholders at the Annual Shareholders
Meeting on January 25, 2011.
|
Exchange
rate information
We publish our Consolidated Financial Statements in euros. As
used in this document, euro or
means the single unified currency that was introduced in the
Federal Republic of Germany on January 1, 1999.
U.S. dollar, U.S.$, USD
or $ means the lawful currency of the United States
of America. The currency translations made in the case of
dividends we have paid have been made at the noon buying rate at
the date of the Annual Shareholders Meeting at which the
dividends were approved. As used in this document, the term
noon buying rate refers to the rate of exchange for
euro, expressed in U.S. dollar per euro, as announced by
the Federal Reserve Bank of New York for customs purposes as the
rate in The City of New York for cable transfers in foreign
currencies.
In order that you may ascertain how the trends in our financial
results might have appeared had they been expressed in
U.S. dollars, the table below shows the average noon buying
rates in The City of New York for cable
3
transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York for
U.S. dollar per euro for our fiscal years. The average is
computed using the noon buying rate on the last business day of
each month during the period indicated.
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Fiscal year ended September 30,
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Average
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2006
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1.2361
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2007
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1.3420
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2008
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1.5067
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2009
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1.3556
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2010
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1.3539
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The following table shows the noon buying rates for euro in
U.S. dollars for the last six months and for November 2010
up to and including November 24, 2010.
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2010
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High
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Low
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May
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|
|
1.3183
|
|
|
|
1.2224
|
|
June
|
|
|
1.2385
|
|
|
|
1.1959
|
|
July
|
|
|
1.3069
|
|
|
|
1.2464
|
|
August
|
|
|
1.3282
|
|
|
|
1.2652
|
|
September
|
|
|
1.3638
|
|
|
|
1.2708
|
|
October
|
|
|
1.4066
|
|
|
|
1.3688
|
|
November (through November 24)
|
|
|
1.4205
|
|
|
|
1.3350
|
|
On November 24, 2010, the noon buying rate was U.S.$1.3350
per 1.00.
Our shares are traded on the Frankfurt Stock Exchange in euro.
Fluctuations in the exchange rate between the euro and the
U.S. dollar will affect the U.S. dollar equivalent of
the euro price of the shares on the Frankfurt Stock Exchange
and, as a result, are likely to affect the market price of the
American Depositary Shares (ADS) on the New York Stock
Exchange. We will declare any cash dividends in euro and
exchange rate fluctuations will affect the U.S. dollar
amounts received by holders of ADSs on conversion of cash
dividends on the shares represented by the ADSs.
Risk
factors
Our business, financial condition and results of operations
could suffer material adverse effects due to any of the risks
described below. While we have described below all the risks
that we consider material, those risks are not the only ones we
face. Additional risks not known to us or that we currently
consider immaterial may also impair our business operations.
Strategic
We operate in highly competitive markets, which are
subject to price pressures and rapid
changes: The worldwide markets for our
products and solutions are highly competitive in terms of
pricing, product and service quality, development and
introduction time, customer service and financing terms. In many
of our businesses, we face downward price pressure and we are or
could be exposed to market downturns or slower growth, which may
increase in times of declining investment activities and
consumer demand. We face strong competitors, some of which are
larger and may have greater resources in a given business area,
as well as competitors from emerging markets, which may have a
better cost structure. Some industries in which we operate are
undergoing consolidation, which may result in stronger
competitors and a change in our relative market position.
Certain competitors might be more effective and faster in
capturing available market opportunities, which in turn may
negatively impact our market share. These factors alone or in
combination may negatively impact our financial condition,
including effects on assets, liabilities and cash flows
(financial condition), and results of operations.
4
Our business is affected by the uncertainties of economic
and political conditions, in particular, in the current
macroeconomic environment following the global downturn and
financial crisis: Our business environment is
influenced by conditions in the domestic and global economies.
In fiscal 2010, certain indices and economic data showed signs
of improvement and stabilization in the macroeconomic
environment compared to the situation during fiscal 2009, which
was characterized by a strong decline in consumer and business
confidence, increased unemployment and reduced levels of capital
expenditure, among other things. In light of the latest economic
developments, the high degree of unemployment in certain
countries, the level of public debt in the U.S., as well as in
Greece and other European countries, uncertainties with respect
to the stability of the Chinese economy, and the potential
impact of budget consolidation measures by governments around
the world, there can be no assurance that these improvements
will be broad-based and sustainable, and it is unclear, how they
will affect the markets relevant for us. In general, due to the
significant proportion of longer-cycle businesses in our Sectors
and the importance of long-term contracts for Siemens, there is
usually a time lag between the development of macroeconomic
conditions and their impact on our financial results. If the
improvements are only temporary and if we are not successful in
adapting our production and cost structure to the current market
environment there can be no assurance that we will not
experience further adverse effects that may be material to our
financial condition, results of operations and our ability to
access capital. For example, it may become more difficult for
our customers to obtain financing and as a result they may
modify, delay or cancel plans to purchase our products and
services or to execute transactions. Furthermore, prices may
decline as a result of adverse market conditions to a greater
extent than currently anticipated. In addition, contracted
payment terms, especially regarding the level of advance
payments by our customers relating to long-term projects, may
become less favorable, which could negatively impact our cash
flows. Additionally, if customers are not successful in
generating sufficient revenue or securing access to the capital
markets they may not be able to pay, or may delay payment of,
the amounts they owe us, which may adversely affect our
financial condition and results of operations.
Numerous other factors, such as fluctuations of energy and raw
material prices as well as global political conflicts, including
in the Middle East and other regions, continue to impact
macroeconomic parameters and the international capital and
credit markets. The uncertainty of economic and political
conditions can have a material adverse impact on our
investments, financial condition and results of operations and
can also make our budgeting and forecasting more difficult.
Our Sectors and Cross-Sector Businesses are affected by a
variety of market conditions and regulation. For example, our
Industry Sector is vulnerable to unfavorable market conditions
in certain segments of the automotive, manufacturing and
construction industries. Our Healthcare Sector, in turn, is
dependent on developments and regulations in the healthcare
systems around the world, particularly in the important
U.S. healthcare market. Finally, our Energy Sector is
exposed to the development of global energy demand and is
considerably affected by regulations related to energy and
environmental policies.
Our businesses must keep pace with technological changes
and develop new products and services to remain
competitive: The markets in which our
businesses operate experience rapid and significant changes due
to the introduction of innovative technologies. To meet our
customers needs in these areas we must continuously design
new, and update existing products and services and invest in and
develop new technologies. Introducing new products and
technologies requires a significant commitment to research and
development, which in return requires considerable financial
resources that may not always result in success. Our sales and
profits may suffer if we invest in technologies that do not
operate or may not be integrated as expected or are not accepted
in the marketplace as anticipated or if our products or systems
are not introduced to the market in a timely manner, in
particular compared to our competitors, or as they become
obsolete. Furthermore, in some of our markets, the need to
develop and introduce new products rapidly in order to capture
available opportunities may lead to quality problems. Our
operating results depend to a significant extent on our ability
to anticipate and adapt to changes in markets and to reduce the
costs of producing high-quality, new and existing products. Any
inability to do so could have a material adverse effect on our
financial condition and results of operations.
Our financial condition and results of operations may be
adversely affected by continued strategic reorientations and
cost-cutting initiatives: We are in a
continuous process of strategic reorientation and constantly
engage in cost-cutting initiatives, including in connection with
ongoing capacity adjustment measures
5
and structural initiatives, for example, in the Cross-Sector
Business Siemens IT Solutions and Services. Capacity adjustments
through consolidation of business activities and manufacturing
facilities, and the streamlining of product portfolios are also
part of these cost reduction efforts. These measures may
negatively impact our financial condition and results of
operations. Any future contribution of these measures to our
profitability will be influenced by the actual savings achieved
and by our ability to sustain these ongoing efforts.
Our financial condition and results of operations may be
adversely affected by portfolio measures: Our
strategy includes divesting our interests in some business areas
and strengthening others through portfolio measures, including
mergers and acquisitions.
With respect to dispositions, we may not be able to divest some
of our activities as planned, and the divestitures we do carry
out could have a negative impact on our financial condition,
results of operations and, potentially, our reputation.
Mergers and acquisitions are inherently risky because of
difficulties that may arise when integrating people, operations,
technologies and products. There can be no assurance that any of
the businesses we acquire can be integrated successfully and as
timely as originally planned or that they will perform well once
integrated. In addition, we may incur significant acquisition,
administrative and other costs in connection with these
transactions, including costs related to integration of acquired
businesses. Furthermore, portfolio measures may result in
additional financing needs and adversely affect our financial
leverage and our
debt-to-equity
ratio. Acquisitions may also lead to substantial increases in
intangible assets, including goodwill. Our balance sheet
reflects a significant amount of intangible assets, including
goodwill. Among our businesses, the largest amount of goodwill
is allocated to the Divisions Diagnostics and
Imaging & IT of the Healthcare Sector, and Industry
Automation of the Industry Sector. If we were to encounter
continuing adverse business developments including negative
effects on our revenues, profits or on cash, or adverse effects
from an increase in the weighted average cost of capital (WACC)
or from foreign exchange rate developments or otherwise perform
worse than expected at acquisition, then these intangible
assets, including goodwill, e.g., at the Diagnostics Division,
might have to be written down further and could materially and
adversely affect our results of operations. The likelihood of
such adverse business developments increases in times of
difficult or uncertain macroeconomic conditions. For example, as
a result of a strategic review which was finalized in the fourth
quarter of fiscal 2010, the Diagnostics Divisions
medium-term growth prospects and the long-term market
development in laboratory diagnostics have been reassessed and
the Divisions business planning has been adjusted
accordingly to reflect expected lower growth prospects. The
adjusted business plan was the basis for the annual goodwill
impairment test in the fourth quarter of fiscal 2010, which
resulted in a goodwill impairment of 1.145 billion
with respect to the goodwill allocated to the Diagnostics
Division.
We may be adversely affected by our equity interests and
strategic alliances: Our strategy includes
strengthening our business interests through joint ventures,
associated companies and strategic alliances. Certain of our
investments are accounted for using the equity method,
including, among others, Nokia Siemens Networks B.V. (NSN),
Enterprise Networks Holdings B.V. (EN), BSH Bosch und Siemens
Hausgeräte GmbH (BSH) and
Kraus-Maffei
Wegmann GmbH&Co.KG (KMW). Any factors negatively
influencing the profitability of our equity investments,
including negative effects on revenues, profits or on cash,
could have an adverse effect on our equity
pick-up
related to these equity interests or may result in a write-down
of these investments. In addition, our financial condition and
results of operations could also be adversely affected in
connection with loans, guarantees or non-compliance with
financial covenants related to these equity investments.
Furthermore, such investments are inherently risky as we may not
be able to sufficiently influence corporate governance processes
or business decisions taken by our equity investments and
strategic alliances that may have a negative effect on our
business. In addition, joint ventures bear the risk of
difficulties that may arise when integrating people, operations,
technologies and products. Strategic alliances may also pose
risks for us because we compete in some business areas with
companies with which we have strategic alliances.
6
Operations
We are dependent upon hiring and retaining highly
qualified management and technical
personnel: Competition for highly qualified
management and technical personnel remains intense in the
industries and regions in which our Sectors and Cross-Sector
Businesses operate, in particular, in times of economic
recovery. In many of our business areas, we intend to expand our
business activities, for which we will need highly skilled
employees. Our future success depends in part on our continued
ability to hire, assimilate and retain engineers and other
qualified personnel. There can be no assurance that we will
continue to be successful in attracting and retaining all the
highly qualified employees and key personnel needed in the
future, including in appropriate geographic locations, and any
inability to do so could have a material adverse effect on our
business.
Increased IT security threats and higher levels of
professionalism in computer crime could pose a risk to our
systems, networks, products, solutions and
services: We observe a global increase in IT
security threats and higher levels of professionalism in
computer crime, which pose a risk to the security of systems and
networks and the confidentiality, availability and integrity of
data. While we attempt to mitigate these risks by employing a
number of measures, including employee training, comprehensive
monitoring of our networks and systems, and maintenance of
backup and protective systems such as firewalls and virus
scanners, our systems, networks, products, solutions and
services remain potentially vulnerable to attacks. Depending on
their nature and scope, such attacks could potentially lead to
the leakage of confidential information, improper use of our
systems and networks, manipulation and destruction of data,
defective products, production downtimes and supply shortages,
which in turn could adversely affect our reputation,
competitiveness and results of operations.
We may face interruption of our supply chain, including
the inability of third parties to deliver parts, components and
services on time, and could be subject to rising raw material
prices: Our financial performance depends in
part on reliable and effective supply chain management for
components,
sub-assemblies
and other materials. Capacity constraints and supply shortages
resulting from ineffective supply chain management may lead to
delays and additional cost. We rely on third parties to supply
us with parts, components and services. Using third parties to
manufacture, assemble and test our products reduces our control
over manufacturing yields, quality assurance, product delivery
schedules and costs. The third parties that supply us with parts
and components also have other customers and may not have
sufficient capacity to meet all of their customers needs,
including ours, during periods of excess demand. Component
supply delays can affect the performance of our Sectors.
Although we work closely with our suppliers to avoid
supply-related problems, there can be no assurance that we will
not encounter supply problems in the future or that we will be
able to replace a supplier that is not able to meet our demand.
This risk is particularly evident in businesses with a very
limited number of suppliers. Shortages and delays could
materially harm our business. Unanticipated increases in the
price of components due to market shortages or other reasons
could also adversely affect the performance of our Sectors.
Our Sectors purchase raw materials including copper, steel,
aluminum and oil, which exposes them to fluctuations in energy
and raw material prices. In recent times, commodities have been
subject to volatile markets, and such volatility is expected to
continue. If we are not able to compensate for our increased
costs or pass them on to customers, price increases could have a
material adverse impact on our financial results. In contrast,
in times of falling commodity prices, we may not fully profit
from such price decreases as we attempt to reduce the risk of
rising commodity prices by several means, such as long-term
contracting or physical and financial hedging. In addition to
price pressure that we may face from our customers expecting to
benefit from falling commodity prices or adverse market
conditions, this could also adversely affect our results of
operations.
We may face operational failures and quality problems in
our value chain processes: Our value chain
comprises all steps, from research and development to supply
chain management, production, marketing, sales and services.
Operational failures in our value chain processes could result
in quality problems or potential product, labor safety,
regulatory or environmental risks. Such risks are particularly
present in relation to our production facilities, which are
located all over the world and have a high degree of
organizational and technological complexity. From time to time,
some of the products we sell might have quality issues resulting
from the design or manufacture of such products or from the
software integrated into them. Such operational failures or
quality issues could have a material adverse effect on our
financial condition and results of operations.
7
Our financial condition and results of operations may be
adversely affected by cost overruns or additional payment
obligations related to the management of our long-term, fixed
price or turnkey projects: We perform a
portion of our business, especially large projects, under
long-term contracts that are awarded on a competitive bidding
basis. Some of these contracts are inherently risky because we
may assume substantially all of the risks associated with
completing the project and the post-completion warranty
obligations. For example, we face the risk that we must satisfy
technical requirements of a project even though we may not have
gained experience with those requirements before we win the
project. The profit margins realized on such fixed-priced
contracts may vary from original estimates as a result of
changes in costs and productivity over their term. We sometimes
bear the risk of unanticipated project modifications, shortage
of key personnel, quality problems, financial difficulties of
our customers, cost overruns or contractual penalties caused by
unexpected technological problems, unforeseen developments at
the project sites, performance problems with our suppliers,
subcontractors and consortium partners or other logistical
difficulties. Certain of our multi-year contracts also contain
demanding installation and maintenance requirements, in addition
to other performance criteria relating to timing, unit cost
requirements and compliance with government regulations, which,
if not satisfied, could subject us to substantial contractual
penalties, damages, non-payment and contract termination. There
can be no assurance that contracts and projects, in particular
those with long-term duration and fixed-price calculation, can
be completed profitably. For additional information, see
Item 5: Operating and financial review and
prospects Critical accounting estimates.
Financial
We are exposed to currency risks and interest rate
risks: We are exposed to fluctuations in
exchange rates, especially between the U.S. dollar and the
euro, because a high percentage of our business volume is
conducted in the U.S. and as exports from Europe. In
addition, we are exposed to currency effects involving the
currencies of emerging markets such as China, India and Brazil.
As a result, a strong euro in relation to the U.S. dollar
and other currencies can have a material impact on our other
revenues and results. Certain currency risks as well as interest
rate risks are hedged on a Company-wide basis using derivative
financial instruments. Depending on the development of foreign
currency exchange rates, our hedging activities can have
significant effects on our cash flow. Our Sectors and
Cross-Sector Businesses engage in currency hedging activities
which sometimes do not qualify for hedge accounting. In
addition, our Corporate Treasury has interest rate hedging
activities which also do not qualify for hedge accounting, and
are subject to changes in interest rates. Accordingly, exchange
rate and interest rate fluctuations may influence our results
and lead to earnings volatility. A strengthening of the euro
(particularly against the U.S. dollar) may also change our
competitive position, as many of our competitors may benefit
from having a substantial portion of their costs based in weaker
currencies, enabling them to offer their products at lower
prices.
We are exposed to volatile credit
spreads: Regarding our Corporate Treasury
activities, widening credit spreads due to uncertainty and risk
aversion in the financial markets might lead to changing fair
market values of our existing trade receivables and derivative
financial instruments. In addition, we also see a risk of
increasing refinancing costs if the recent stabilization and
improvement in the global financial markets does not persist.
Furthermore, costs for buying protection on credit default risks
could increase due to a potential increase of counterparty risks.
Our future financing via Corporate Treasury may be
affected by the uncertainties of economic conditions and the
development of capital and bank markets: Our
Corporate Treasury is responsible for the financing of the
Company and our Sectors and Cross-Sector Businesses. Negative
developments in the foreign exchange, money or capital markets,
such as limited availability of funds (particularly
U.S. dollar funds), may increase our overall cost of
funding. The worldwide financial market crisis has had a global
impact on the capital markets. These developments and the higher
risk awareness of investors and of governments, in particular,
may lead to further politically influenced regulation of the
financial sector, could influence our future possibilities of
obtaining debt financing, and may significantly increase credit
spreads. Regarding our Corporate Treasury activities,
deteriorating credit quality
and/or
default of counterparties may adversely affect our results.
Downgrades of our ratings could increase our cost of
capital and could negatively affect our
businesses: Our financial condition and
results of operations are influenced significantly by the actual
and expected
8
performance of the Sectors and Cross-Sector Businesses, as well
as the Companys portfolio measures. An actual or expected
negative development of our results of operations or cash flows
or an increase in our net debt position could result in the
deterioration of our credit rating. Downgrades by rating
agencies could increase our cost of capital, may reduce our
potential investor base and may negatively affect our businesses.
Our financing activities subject us to various risks,
including credit, interest rate and foreign exchange
risk: We provide our customers with various
forms of direct and indirect financing in connection with large
projects such as those undertaken by our Energy Sector. We
finance a large number of smaller customer orders, for example
the leasing of medical equipment, in part through SFS. SFS also
incurs credit risk by financing third-party equipment or by
taking direct or indirect participations in financings, such as
syndicated loans. In part, we take a security interest in the
assets we finance or we receive additional collateral. We may
lose money if the credit quality of our customers deteriorates
or if they default on their payment obligation to us, if the
value of the assets in which we have taken a security interest
or additional collateral declines, if interest rates or foreign
exchange rates fluctuate, or if the projects in which we invest
are unsuccessful. Potential adverse changes in economic
conditions could cause a further decline in the fair market
values of financial assets and customer default rates to
increase substantially and asset and collateral values to
decline, resulting in losses which could have a negative effect
on our financial condition and results of operations.
Our financial condition and results of operations may be
adversely affected by several parameters influencing the funded
status of our pension benefit plans: The
funded status of our pension plans may be affected by an
increase or decrease in the defined benefit obligation (DBO), as
well as by an increase or decrease in the value of plan assets.
Pensions are accounted for in accordance with actuarial
valuations, which rely on statistical and other factors in order
to anticipate future events. These factors include key pension
plan valuation assumptions such as the discount rate, expected
rate of return on plan assets, rate of future compensation
increases and pension progression. Actual developments may
differ from assumptions due to changing market and economic
conditions, thereby resulting in an increase or decrease in the
DBO. Significant movements in financial markets or a change in
the portfolio mix of invested assets can result in corresponding
increases or decreases in the value of plan assets, particularly
equity securities, or in a change of the expected rate of return
on plan assets. Also, changes in pension plan assumptions can
affect net periodic pension cost. For example, a change in
discount rates or in the expected return on plan assets
assumptions may result in changes in the net periodic benefit
cost in the following financial year. In order to comply with
local pension regulations in selected foreign countries, we may
face a risk of increasing cash outflows to reduce an
underfunding of our pension plans in these countries, if any. At
the end of fiscal 2010, the combined funded status of
Siemens principal pension benefit plans showed an
underfunding of 6.4 billion, compared to an
underfunding of 4.0 billion at the end of fiscal
2009. Further, the combined funded status of Siemens
principal other post-employment benefit plans showed an
underfunding of 0.7 billion at the end of fiscal
2010, compared to an underfunding of 0.6 billion at
the end of the prior fiscal year. Other liabilities for pension
plans and similar commitments amounted to 1.2 billion
at the end of fiscal 2010, compared to 1.1 billion at
the end of the prior fiscal year. For further information, see
Item 5: Operating and financial review and
prospects Critical accounting estimates and
Notes to Consolidated Financial Statements.
Compliance
We are subject to regulatory risks associated with our
international operations: Protectionist trade
policies and changes in the political and regulatory environment
in the markets in which we operate such as foreign exchange
import and export controls, tariffs and other trade barriers and
price or exchange controls could affect our business in several
national markets, impact our sales and profitability and make
the repatriation of profits difficult, and may expose us to
penalties, sanctions and reputational damage. In addition, the
uncertainty of the legal environment in some regions could limit
our ability to enforce our rights. For example, as a globally
operating organization, we conduct business with customers in
countries that are subject to export control regulations,
embargos, sanctions or other forms of trade restrictions imposed
by the U.S., the European Union or other countries or
organizations. Business with customers in Iran has recently
become subject to significant further regulation under
Resolution 1929 (2010) of the Security Council of the
United Nations, the U.S. Comprehensive Iran Sanctions,
Accountability, and Divestment Act of 2010 enacted on
July 1, 2010 as well as the Council Regulation
9
(EU) No. 961/2010
of October 25, 2010 on restrictive measures against Iran
and repealing Regulation
(EC) No. 423/2007.
Even though we have decided, as a general rule, as described in
more detail in Item 4: Information on the
Company Overview, not to enter into new
contracts with customers in Iran, we may still conduct certain
business activities and provide products and services to
customers in Iran under limited circumstances in accordance with
the detailed policies implementing this general rule. New or
tightened export control regulations, sanctions, embargos or
other forms of trade restrictions imposed on Iran or on other
sanctioned countries in which we do business may result in a
curtailment of our existing business in such countries and in an
adaptation of our policies. In addition, the termination of our
activities in Iran or other sanctioned countries may expose us
to customer claims and other actions. We are currently in the
process of evaluating the potential impact, if any, of the Iran
legislation referenced above on, among other things,
pre-existing contractual obligations in our Energy Sectors
business in Iran.
We expect that sales to emerging markets will continue to
account for an increasing portion of our total revenue, as our
business naturally evolves and as developing nations and regions
around the world increase their demand for our offering.
Emerging market operations present several risks, including
civil disturbances, health concerns, cultural differences such
as employment and business practices, volatility in gross
domestic product, economic and governmental instability, the
potential for nationalization of private assets and the
imposition of exchange controls. In particular, the Asian
markets are important for our long-term growth strategy, and our
sizeable operations in China are influenced by a legal system
that is still developing and is subject to change. Our growth
strategy could be limited by governments supporting local
industries. Our Sectors and Cross-Sector Businesses,
particularly those that derive their revenue from large
projects, could be adversely affected if future demand, prices
and gross domestic product in the markets in which those Sectors
and Cross-Sector Businesses operate do not develop as favorably
as expected. If any of these risks or similar risks associated
with our international operations were to materialize, our
financial condition and results of operations could be
materially adversely affected.
Public prosecutors and other government authorities in
jurisdictions around the world are conducting investigations of
our Company and certain of our current and former employees
regarding allegations of public corruption and other illegal
acts. The results of these and any future investigations may
have a material adverse effect on the development of future
business opportunities, our financial condition and results of
operations, the price of our shares and American depository
shares (ADS) and our reputation: Public
prosecutors and other government authorities in jurisdictions
around the world are investigating allegations of corruption at
a number of our former business groups and regional companies.
In addition to ongoing investigations, there could be additional
investigations launched in the future by governmental
authorities in these or other jurisdictions and existing
investigations may be expanded. As a result, governmental
authorities may take action against us or some of our employees.
These actions could include further criminal and civil fines as
well as penalties, sanctions, injunctions against future
conduct, profit disgorgements, disqualifications from directly
and indirectly engaging in certain types of business, the loss
of business licenses or permits or other restrictions. In
addition to monetary and other penalties, further monitors could
be appointed to review future business practices with the goal
of ensuring compliance with applicable laws and we may otherwise
be required to further modify our business practices and our
Compliance Program. Tax authorities may also impose certain
remedies, including potential tax penalties. Depending on the
development of the investigations, we may be required to accrue
material amounts for such penalties, damages, profit
disgorgement or other possible actions that may be taken by
various governmental authorities. Any of the foregoing could
have a material adverse effect on our business, financial
condition and results of operations, the price of our shares and
ADS and our reputation.
Additionally, we engage in a substantial amount of business with
governments and government-owned enterprises around the world.
We also participate in a number of projects funded by government
agencies and intergovernmental organizations such as
multilateral development banks. If we or our subsidiaries are
found to have engaged in certain illegal acts or are found not
to have taken effective steps to address the allegations or
findings of corruption in our business, this may impair our
ability to participate in business with governments or
intergovernmental organizations and may result in formal
exclusions from such business, which may have a material adverse
effect on our business. For example, legislation of member
states of the European Union could in certain cases result in
mandatory or discretionary exclusion from public contracts in
case of a conviction for bribery and certain other offences or
for other reasons. As described in more detail in Item 4:
Information on the Company
10
Legal proceedings, we or our subsidiaries have in the past
been excluded from government contracting as a result of
findings of corruption or other misconduct. Conviction for
illegal behavior or exclusion from participating in contracting
with governments or intergovernmental organizations in one
jurisdiction may lead to exclusion in other jurisdictions or by
other intergovernmental organizations. Even if we are not
formally excluded from participating in government business,
government agencies or intergovernmental organizations may
informally exclude us from tendering for or participating in
certain contracts. From time to time, we have received requests
for information from government customers and intergovernmental
organizations regarding the investigations described above and
our response to those investigations. We expect to continue to
receive such requests in the future.
In addition, our involvement in existing and potential
corruption proceedings could damage our reputation and have an
adverse impact on our ability to compete for business from both
public and private sector customers. The investigations could
also impair our relationship with business partners on whom we
depend and our ability to obtain new business partners. They may
also adversely affect our ability to pursue strategic projects
and transactions which could be important to our business, such
as strategic alliances, joint ventures or other business
combinations. Current or possible future investigations could
result in the cancellation of certain of our existing contracts,
and the commencement of significant third-party litigation,
including by our competitors.
Many of the governmental investigations are at this time still
ongoing and we cannot predict when they will be completed or
what their outcome will be, including the potential effect that
their results or the reactions of third parties thereto may have
on our business. Future developments in these investigations,
responding to the requests of governmental authorities and
cooperating with them, especially if we are not able to resolve
the investigations in a timely manner, could divert
managements attention and resources from other issues
facing our business. We have implemented a worldwide Compliance
Program to prevent and address compliance risks and are
continuously working to improve the effectiveness and efficiency
of this program, supported by our global compliance organization.
Examinations by tax authorities and changes in tax
regulations could adversely affect our financial condition and
results of operations: We operate in
approximately 190 countries and therefore are subject to
different tax regulations. Changes in tax law could result in
higher tax expense and payments. Furthermore, this could
materially impact our tax receivables and liabilities as well as
deferred tax assets and deferred tax liabilities. In addition,
the uncertainty of tax environment in some regions could limit
our ability to enforce our rights. As a globally operating
organization, we conduct business in countries subject to
complex tax rules, which may be interpreted in different ways.
Future interpretations or developments of tax regimes may affect
our tax liability, return on investments and business
operations. We are regularly examined by tax authorities in
various jurisdictions.
Our business could suffer as a result of current or future
litigation: We are subject to numerous risks
relating to legal, governmental and regulatory proceedings to
which we are currently a party or to which we may become a party
in the future. We routinely become subject to legal,
governmental and regulatory investigations and proceedings
involving, among other things, requests for arbitration,
allegations of improper delivery of goods or services, product
liability, product defects, quality problems, intellectual
property infringement, non-compliance with tax regulations
and/or
alleged or suspected violations of applicable laws. In addition,
we may face further claims in connection with the circumstances
that led to the corruption proceedings described above. For
additional information with respect to specific proceedings, see
Item 4: Information on the Company Legal
proceedings. There can be no assurance that the results of
these or any other proceedings will not materially harm our
business, reputation or brand. Moreover, even if we ultimately
prevail on the merits in any such proceedings, we may have to
incur substantial legal fees and other costs defending ourselves
against the underlying allegations. We record a provision for
legal risks when (1) we have a present obligation as a
result of a past event; (2) it is probable that an outflow
of resources embodying economic benefits will be required to
settle the obligation; and (3) a reliable estimate can be
made of the amount of the obligation. In addition, we maintain
liability insurance for certain legal risks at levels our
management believes are appropriate and consistent with industry
practice. Our insurance policy, however, does not protect us
against reputational damage. Moreover, we may incur losses
relating to legal proceedings beyond the limits, or outside the
coverage, of such insurance. Finally, there can be no assurance
that we will be able to maintain adequate insurance coverage on
commercially reasonable terms in the future. Each of these
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risks may have a material adverse effect on our financial
condition and results of operations, and our provisions for
legal proceedings-related losses may not be sufficient to cover
our ultimate losses or expenditures.
We are subject to environmental and other government
regulations: Some of the industries in which
we operate are highly regulated. Current and future
environmental and other government regulations or changes
thereto, may result in significant increases in our operating or
product costs. We could also face liability for damage or
remediation for environmental contamination at the facilities we
design or operate. For example, we are required to bear
environmental
clean-up
costs mainly related to remediation and environmental protection
liabilities which have been accrued based on the estimated costs
of decommissioning facilities for the production of uranium and
mixed-oxide fuel elements in Hanau, Germany, as well as a
nuclear research and service center in Karlstein, Germany. For
further information, see Item 4: Information on the
Company Environmental matters and Notes
to Consolidated Financial Statements. We establish
provisions for environmental risks when (1) we have a
present obligation as a result of a past event; (2) it is
probable that an outflow of resources embodying economic
benefits will be required to settle the obligation; and
(3) a reliable estimate can be made of the amount of the
obligation. With regard to certain environmental risks, we
maintain liability insurance at levels that our management
believes are appropriate and consistent with industry practice.
We may incur environmental losses beyond the limits, or outside
the coverage, of such insurance, and such losses may have a
material adverse effect on our financial condition and results
of our operations, and our provisions for environmental
remediation may not be sufficient to cover our ultimate losses
or expenditures.
ITEM 4:
INFORMATION ON THE COMPANY
Overview
Siemens traces its origins to 1847. Beginning with advances in
telegraph technology, the Company quickly expanded its product
line and geographic scope and was already a multi-national
business by the end of the 19th century. The Company formed a
partnership under the name Siemens & Halske in 1847,
reorganized as a limited partnership in 1889 and as a stock
corporation in 1897. The Company moved its headquarters from
Berlin to Munich in 1949, and assumed its current name as
Siemens Aktiengesellschaft, a stock corporation under the
Federal laws of Germany, in 1966. The address of our principal
executive offices is Wittelsbacherplatz 2, D-80333 Munich,
Germany; telephone number +49 (89) 636 00.
During fiscal 2010, Siemens employed an average of
402,700 people and operated in approximately 190 countries
worldwide. In fiscal 2010, we had revenue of
75.978 billion. Our balanced business portfolio is
based on leadership in electronics and electrical engineering.
Following our strategy to benefit from global megatrends,
Siemens operations are focused on three Sectors. These
Sectors are Industry, Energy and Healthcare. We have combined
the expertise in these three Sectors with a commitment to
original research and development (R&D) to build strong
global market positions. The Industry Sectors portfolio
ranges from industry automation and drives products and services
to building, lighting and mobility solutions and services as
well as system integration and solutions for plant business. The
Energy Sector offers a wide spectrum of products, services and
solutions for the generation, transmission and distribution of
power and for the extraction, conversion and transport of oil
and gas. The Healthcare Sector develops, manufactures and
markets diagnostic and therapeutic systems, devices and
consumables, as well as information technology systems for
clinical and administrative purposes. Besides these activities,
Siemens IT Solutions and Services as well as Siemens Financial
Services (SFS) support Sector activities as business partners
(Cross-Sector Businesses) while continuing to build up their own
business with external customers. Equity Investments includes
investments accounted for by the equity method, at cost or as
current
available-for-sale
financial assets that are not allocated to a Sector or Cross
Sector Business by reason of strategic fit. Our businesses
operate under a range of regional and economic conditions. In
internationally-oriented long-cycle industries, for example,
customers have multi-year planning and implementation horizons
that tend to be independent of short-term economic trends. Our
activities in these areas include primarily the Energy Sector
and the mobility solutions business within the Industry Sector.
The Healthcare Sectors business activities are relatively
unaffected by short-term economic trends but are dependent on
regulatory and policy developments around the world. In fields
with more industry-specific cycles, customers tend to have
shorter horizons for their spending
12
decisions and greater sensitivity to current economic
conditions. Our activities in these areas include automation and
drives as well as lighting operations within the Industry
Sector. Our businesses, especially the Healthcare Sector, are
also influenced by technological change and the rate of
acceptance of new technologies.
As a globally-operating organization, we also conduct business
with customers in Iran, Syria and Cuba. The U.S. Department
of State designates these countries as state sponsors of
terrorism and subjects them to export controls. Our activities
with customers in these states are insignificant relative to our
size (approximately 1% of our revenue in fiscal 2010) and
do not, in our view, represent either individually or in
aggregate a material investment risk. We actively employ systems
and procedures for compliance with applicable export control
programs, including those in the United States, the European
Union and Germany.
As previously disclosed, we have decided that, subject to the
exceptions outlined below we will not enter into new contracts
with customers in Iran. Accordingly, we have issued group-wide
policies that establish the details of our general decision.
Under these policies, Siemens shall not tender further bids for
direct deliveries to customers in Iran. Furthermore, indirect
deliveries from Siemens to Iran via external third parties,
including companies in which Siemens holds a minority stake, are
generally prohibited unless an exception is specifically
approved under certain circumstances. Notwithstanding the
foregoing, products and services for humanitarian purposes,
including the products and services supplied by our Healthcare
Sector, and products and services required to service the
installed base (e.g. spare parts and maintenance and assembly
services) may still be provided under the policies. Finally,
pre-existing commitments to customers in Iran may be honored,
i.e. legally binding obligations resulting from agreements that
existed, or bids that were submitted, before the aforementioned
policies were announced and adopted. Although, over time, we
expect our business activities in Iran to decline as a result of
the implementation of the new policies and the related reduction
of the number of new contracts, the actual development of our
revenues in the future will largely depend on the timing and
scope of customer requests to fulfill pre-existing commitments.
For additional information, see Item 3: Key
information Risk factors.
Strategy
Global
megatrends
Global megatrends are long-term processes that will drive global
demand in coming decades. We at Siemens view demographic change,
urbanization, climate change and globalization as megatrends
that will have an impact on all humanity and leave their mark on
global developments. We therefore have aligned our strategy and
business activities with these trends. In our three Sectors,
Industry, Energy and Healthcare, we have developed pioneering
products and solutions which we believe are capable of dealing
with climate change, contributing to improved healthcare for a
growing and aging population, and shaping infrastructures and
mobility in urban areas in an energy-efficient and thus
environmentally friendly way.
Demographic change includes two major trends: the
worlds population continues to grow rapidly and to get
older. It is estimated that by the year 2050 the worlds
population will reach nine billion, compared to approximately
seven billion today. By then, life expectancy is expected to be
at a global average of 76 years, compared to 68 years
today and 46 years in 1950. This will challenge the ability
of future healthcare systems to make affordable healthcare
available to everyone. Siemens provides innovative medical
solutions that can help to reduce healthcare costs, while at the
same time improving the quality of healthcare, through
preventive care and early diagnosis of disease two
essential requirements for living longer, healthier lives.
Urbanization refers to the growing number of
large, densely-populated cities around the world. This includes
both established metropolitan centers in industrialized nations
and fast-rising urban centers in emerging economies. In 2009,
for the first time in human history more than half the
worlds population lived in urban areas. This figure is
expected to rise to 70% by 2050, coinciding with rapid overall
population growth, as mentioned above. Accordingly, there is
strong demand for sustainable and energy-efficient
infrastructures for buildings, transportation systems, and
energy and water supply. We believe that Siemens
wide-ranging portfolio is well-suited to improving the quality
of life in cities. We believe that our products and solutions
for manufacturing, urban transit, building
13
construction, power distribution and hospitals, among other
things, can help to advance mobility, security and an adequate
supply of lifes basic requirements while at the same time
reducing the burden on the environment.
Climate change is a fact. The average global
surface temperature increased by 0.76 degrees Celsius between
1850 and the beginning of the
21st century.
This correlates with a rise in carbon dioxide concentration in
the atmosphere, which is higher today than at any time in the
last 800,000 years. The reduction of greenhouse gas
emissions is vital to avoiding increasingly drastic effects on
our ecosystem. There is a strong need for innovative
technologies to increase efficiency and reduce the emissions
related to energy generation and consumption. Siemens is a
leader in climate protection technologies, including but not
limited to increasing the efficiency of power generation from
fossil fuels; generating energy from renewable sources such as
wind and solar; increasing the efficiency and performance of
electrical grids; increasing the energy efficiency of
transportation solutions and industrial processes; reducing the
energy needs of buildings; and reducing emissions from all of
the above.
Globalization refers to the increasing integration
of the worlds economies, politics, culture and other areas
of life. Between 1950 and 2007, the volume of global trade
expanded at an average annual rate of 6.2%. The number of
multinational enterprises rose globally from around 10,000 in
1968/69 to more than 80,000 in 2008. Further, the four largest
threshold countries Brazil, Russia, India and China
(BRIC) are emerging as important players in the
global economy. Globalization leads to increased competitive
pressure and demand for economical,
timely-to-market,
high-quality products and solutions. With our offerings, we aim
to increase our customers productivity by facilitating
process and energy efficiency improvements and the flow of
goods. In addition, we believe that our presence in
approximately 190 countries puts us in an excellent position to
leverage above-average growth in emerging markets.
Strategy
of the Siemens Group
Our vision is to be a pioneer in
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energy efficiency,
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industrial productivity,
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affordable and personalized healthcare, and
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intelligent infrastructure solutions.
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This vision is reflected in our company strategy, which guides
us in turning our vision into reality. Above all, we are aiming
to be a market and technology leader in our businesses, based on
our corporate values to be responsible,
excellent and innovative. We believe that this
approach will position us to achieve sustainable, profitable
growth and to outpace our competitors. As an integrated
technology company, we intend to profit from the megatrends
described above.
Our strategy comprises what we call our three strategic
directions:
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focusing on innovation-driven growth markets,
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getting closer to our customers, and
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using the power of Siemens.
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Through the end of fiscal 2010, we implemented our strategy
through the
Fit42010
program. In the context of
Fit42010,
we defined ambitious targets for growth, profitability,
liquidity and our capital structure that we aimed to achieve by
the end of fiscal 2010. These targets were established with
normal business cycles in mind, i.e., without taking into
account the global recession caused by the financial crisis and
its aftereffects on our business over the past two fiscal years.
For further information on the financial measures of the
Fit42010
program, see Item 5: Operating and financial review
and prospects Business and operating
environment Financial performance measures.
The
Fit42010
program divided the potential harbored by Siemens as an
integrated technology company into four categories: Portfolio,
People Excellence, Operational Excellence and Corporate
Responsibility. We have
14
carefully targeted our Portfolio at attractive markets by
means of stringent resource allocation and a clear focus on the
three Sectors. We deliver value for our customers because,
within the context of People Excellence, our standard is
to employ the best workers worldwide a precondition
for a high-performance culture. Diversity in our management is a
key component of our corporate strategy and a fundamental
prerequisite for our Companys long-term success. Open
Innovation opening up businesses to bring in the
expertise of a wide range of internal and external experts in
different areas from around the world helps to
ensure that we continue to constantly develop and refine our
technology. Open Innovation formed part of the Operational
Excellence element of
Fit42010,
as did supply chain management, which is intended to increase
efficiency in sourcing and the supply chain throughout our
Company. The Corporate Responsibility element, finally,
has seen us introduce a uniform Compliance Program worldwide,
with systems and processes to ensure proper conduct, and
continues to highlight both our commitment to society and our
acknowledgement of the significance of climate protection.
Building on the achievements of our
Fit42010
program and the preceding company programs, we are approaching
the future. Effective fiscal 2011, One Siemens is our
framework for sustainable value creation, with a financial
target system for capital-efficient growth and the goal of
continuous improvement relative to the market and our
competitors.
We will measure our performance against our competitors. Our
goal and our aspiration is to consistently outperform our
competitors and to set standards for leadership with
respect to financial performance as well as operational
strength. The financial target system of One Siemens defines
financial key performance indicators for revenue growth, for
capital efficiency and profitability, and for the optimization
of our capital structure. In addition, we set hurdle rates that
generally need to be considered before acquisitions are
executed. Further, we defined an indicator targeted at an
attractive dividend policy. We believe that these indicators
will play a key role in driving the value of our Company. For
further information, see Item 5: Operating and
financial review and prospects Business and
operating environment Financial performance
measures.
To achieve our goal of sustainably enhancing the value of
Siemens and of exploiting the full potential of our integrated
technology company, we have defined three concrete focus areas
along each of the three strategic directions set forth above,
which we aim to address in the years ahead. In the strategic
direction of focusing on innovation-driven growth
markets, our first focus area is to be a pioneer in
technology-driven markets. We intend to concentrate on
innovation- and technology-driven markets that will form the
basis of Siemens core business in the future, for example,
by providing intelligent and sustainable infrastructures for the
worlds cities. Our second focus area is to strengthen
our portfolio. We are actively and systematically managing
our portfolio with the principal aim of achieving or maintaining
a no. 1 or no. 2 position in our current and future
markets. To provide a leading environmental portfolio is
our third focus area: Not only does our Environmental Portfolio
enhance our Companys revenue, it also makes a significant
contribution to climate protection. Our revenue target for our
Environmental Portfolio is to exceed 40 billion by
the end of fiscal 2014.
In the second strategic direction of getting closer to our
customers, one of our focus areas is to grow in emerging
markets while maintaining our position in our established
markets. We plan to offer more products, solutions and services
for the rapidly growing entry-level segments, which are more
price sensitive and mostly found in emerging markets. As a
consequence, we aim to continuously increase our share of
revenue from emerging markets. A second focus area is to
expand our service business, which is highly diversified
and broadly distributed throughout our Company. We believe that
the large installed base of our products and solutions at our
clients provides promising growth opportunities for our service
business. Services play a key role in profitability at Siemens
and, in addition, long-term service agreements are less likely
to be impacted by economic fluctuations. To intensify our
customer focus and to increase customer satisfaction is our
third focus area. We believe that customer proximity and local
presence are important factors in being able to respond quickly
to changing market requirements.
In the strategic direction of using the power of Siemens,
our first focus area is to encourage lifelong learning and
development of our employees. We invest continuously in
expanding the expertise of our people through demanding training
and education programs. We aim to develop our employees
worldwide by identifying talent and offering challenging tasks.
To empower our diverse and engaged people worldwide is
our second focus area which involves strengthening diversity. We
believe that the strong potential of our employees skills,
experience and
15
qualifications can give us a clear competitive advantage in our
global markets. The third focus area is to stand for
integrity. On the basis of our values, we have formulated
clear and binding principles of conduct that cover all aspects
of our entrepreneurial activities.
Segment
strategies
Our Industry Sector is one of the worlds leading
suppliers of production, transportation, building, and lighting
technology. The Sector aims to make customers more competitive
by automating the entire lifecycle of customer investments. Its
innovative and environmentally-friendly products, systems,
services and solutions are designed specifically to increase the
productivity and flexibility of its customers and to help them
make more efficient use of resources and energy. Our Industry
Sector relies on common technology platforms (such as Totally
Integrated Automation, or TIA) that are developed into
business-specific applications by the Divisions. This approach
is intended to enable the Divisions to achieve profitable
above-average growth.
We believe that our Energy Sector is the only company in
the world capable of improving efficiency throughout the entire
chain of energy conversion, from the extraction of
oil & gas via power generation to the transmission and
distribution of electric energy. As an integrated technology
company, the Sector occupies a leading position in its industry
in terms of technology and continues to set industry standards.
Our Energy Sector aims to grow profitably and at a faster than
average rate to achieve a market-leading position in every
single business area.
The strategy pursued by our Healthcare Sector focuses on
increasing efficiency in healthcare by improving quality while
reducing cost. The Sector strives to continuously enhance its
market position by consistently focusing on customer
requirements and market demands, by implementing an innovation
strategy for its products, services and solutions to meet these
needs, and by continuously improving its own cost position. Our
Healthcare Sector is working on building up its presence in the
growth markets of the future, characterized by closer
integration between diagnostics and therapy, and an increasing
demand for efficient healthcare delivery in emerging markets.
The Sectors integrated approach combining medical imaging
and therapy systems, laboratory diagnostics and healthcare IT
systems addresses the entire medical supply chain
from prevention and early detection to diagnosis, and on to
treatment and aftercare.
Siemens IT Solutions and Services, a leading European IT
service provider, offers IT expertise and delivers
industry-focused
end-to-end
IT solutions by leveraging Siemens technology and
capabilities. The portfolio ranges from consulting, software
development and deployment, and system integration to the
comprehensive management of IT infrastructures. With an
understanding of the clients business and core processes,
Siemens IT Solutions and Services strong engineering
culture enables it to create practical innovations with
measurable value to the customer. Siemens IT Solutions and
Services is a reliable and sustainable partner in the
transformation of business processes. In fiscal 2010, we
launched a strategic reorientation of Siemens IT Solutions and
Services aimed at strengthening the competitive position of the
business in preparation for its operation on a standalone basis,
including a reorganization of solutions, outsourcing and
software activities. Siemens IT Solutions and Services
position as a legally separate operating company within the
Siemens Group as of October 1, 2010, together with its
simplified organizational structure and processes, gives Siemens
IT Solutions and Services greater flexibility to master the
dynamics of the IT services market.
Siemens Financial Services (SFS) pursues a three-part
strategy, comprising the management of the financial risks to
which Siemens is exposed, the tailoring of financing solutions
for Siemens customers to support our Companys business
activities, and the provision of finance for other companies,
primarily in the three fields of industry, energy and
healthcare. By leveraging its financing expertise and industrial
know-how, SFS creates value for its customers and helps them
strengthen their competitiveness.
16
Important
corporate programs and initiatives
Program
for the reduction of legal entities
In order to reduce complexity within our group structure,
optimize synergies and strengthen governance and transparency,
we had started a program aimed at reducing the number of legal
entities. Due to significant M&A activities targeted at
enhancing and optimizing our portfolio, the number of legal
entities had substantially increased in recent years.
By the end of the current fiscal year, we achieved our target of
reducing the number of legal entities, including non-controlling
interests, to fewer than 1,000 by 2010. This number excludes the
recently established legal entities related to the legal
carve-out of Siemens IT Solutions and Services and legal
entities that are due to be sold, liquidated or merged where
Siemens has taken all such action as is within its control to
complete such sale, liquidation or merger. This compares to
approximately 1,300 legal entities at the end of the prior
fiscal year, approximately 1,600 legal entities at the end of
fiscal 2008 and approximately 1,800 legal entities at the end of
fiscal 2007. The reduction was achieved primarily by integrating
legal entities into existing Siemens Regional Companies.
Streamlining actions within our portfolio also contributed to
the achievement of this goal.
Real
estate bundling program
In 2009, Siemens initiated a multi-year program to improve the
efficiency of its real estate management, which is projected to
run until 2014. Under the program, Siemens is bundling its
entire real estate portfolio in Siemens Real Estate (SRE) and
implementing further measures to increase the efficiency of the
real estate assets bundled in SRE. The program is expected to
generate approximately 250 million in annual cost
savings for the Siemens Sectors and Cross-Sector Businesses by
the end of fiscal 2011 and approximately 400 million
in annual cost savings from 2014 onward, mainly through the more
efficient utilization of space and a reduction in vacant
property. Compared to the cost position prior to the start of
the program, annual cost savings of approximately
190 million for the Siemens Sectors and Cross-Sector
Businesses have already been achieved by the end of fiscal 2010.
During its implementation, the real estate bundling program
entails costs associated with reducing vacancy and consolidating
locations, primarily at SRE. For further information, see
Item 5: Operating and financial review and
prospects Fiscal 2010 compared to fiscal
2009 Segment information analysis
Reconciliation to Consolidated Financial Statements
Siemens Real Estate.
Portfolio
activities
Since fiscal 2008, we have completed the following transactions
to optimize our business portfolio for sustainable profitability
and growth:
Acquisitions
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At the beginning of November 2009, the Sector Energys
Renewable Division completed the acquisition of 100% of Solel
Solar Systems Ltd., a solar thermal power technology company;
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Acquisition of various other entities in fiscal 2010, which were
neither material individually nor in aggregate;
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Acquisition of various entities in fiscal 2009, which were
neither material individually nor in aggregate;
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Sector Healthcares Diagnostics division acquired Dade
Behring at the beginning of November 2007 to further expand
Healthcares position in the growing laboratory diagnostics
market; and
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Acquisition of three entities in fiscal 2008, which were not
significant individually: BJC, Spain, a supplier of switches and
socket-outlets at sector Industry, Building Technologies
division; Innotec GmbH, a leading software provider for
lifecycle management solutions at Sector Industrys
Industry Automation division; and the rolling mill technology
specialist Morgan Construction Co., USA, at Sector Industry,
Industry Solutions division.
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17
Dispositions
and discontinued operations
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At the beginning of November 2009, the Sector Industrys
Mobility Division sold its Airfield Solutions Business;
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At the end of December 2009, the Sector Healthcare sold its 25%
minority stake in Dräger Medical AG & Co. KG to
the majority shareholder Drägerwerk AG & Co. KGaA;
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In January 2009, Siemens announced its intent to sell, and
classified as held for disposal, its 34% interest in the joint
venture Areva NP S.A.S., held by the Energy Sector. The Company
expects to receive the expert opinion regarding the valuation of
Areva NP S.A.S. within calendar year 2010, which is a necessary
precondition to close this transaction;
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The sale of Siemens 50% stake in Fujitsu Siemens Computers
(Holding) BV (FSC), held by the segment Equity Investment,
closed at the beginning of April 2009;
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At the beginning of October 2008, Siemens completed the transfer
of an 80.2% stake in Siemens Home and Office Communication
Devices GmbH & Co. KG (SHC), reported in Centrally
managed portfolio activities;
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By the end of September 2008, the Siemens enterprise networks
business, reported in discontinued operations and formerly part
of Com, was brought into the joint venture Enterprise Networks
Holdings BV, the Netherlands. In exchange, Siemens received a
49% stake in Enterprise Networks Holdings BV, while the
remaining 51% are held by The Gores Group, USA, which
contributed two entities Enterasys and SER
Solutions to the joint venture. Commencing with
closing of the transaction, Siemens accounts its remaining
equity interest, held by the segment Equity Investments, under
the equity method; and
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The sale of Siemens VDO Automotive (SV), reported as
discontinued operations, to Continental AG, Hanover, Germany,
closed at the beginning of December 2007.
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For a detailed discussion of our acquisitions, dispositions and
discontinued operations, see Notes to Consolidated
Financial Statements.
Description
of business
Our financial reporting comprises six reportable segments. These
segments consist of:
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three Sectors, Industry, Energy and Healthcare, which are
reported along with fourteen Divisions which comprise the
Divisions, Industry Automation, Drive Technologies, Building
Technologies, OSRAM, Industry Solutions and Mobility, belonging
to the Industry Sector, the Divisions, Fossil Power Generation,
Renewable Energy, Oil & Gas, Power Transmission and
Power Distribution, belonging to the Energy Sector and the
Divisions, Imaging & IT, Workflow &
Solutions and Diagnostics, belonging to the Healthcare Sector,
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Equity Investments and
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two Cross-Sector Businesses, Siemens IT Solutions and Services
and Siemens Financial Services.
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The following figure shows Siemens reporting structure for
the periods covered by this annual report:
During fiscal 2010, Siemens initiated a change of the
organizational structure of its Healthcare Sector with effect
from October 1, 2010. For additional information, see
Healthcare. Financial reporting for
fiscal 2010 continued to be based on the organizational
structure effective until September 30, 2010 as described
above.
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Industry
The Industry Sector offers a complete spectrum of products,
services and solutions for the efficient use of resources and
energy and improvements of productivity in industry and
infrastructure. Its integrated technologies and holistic
solutions address primarily industrial customers, such as
process and manufacturing industries, and infrastructure
customers, especially in the areas of transport, buildings and
utilities. The portfolio spans industry automation and drives
products and services, building, lighting and mobility solutions
and services, and system integration and solutions for plant
businesses. The Sector consists of six Divisions: Industry
Automation, Drive Technologies, Building Technologies, OSRAM,
Industry Solutions, and Mobility.
The following table provides key financial data concerning the
Industry Sector.
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Year ended
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September 30, 2010
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Total revenue
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34.869 billion
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External revenue
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33.728 billion
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External revenue as percentage of Siemens revenue
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44.39%
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Sector profit
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3.478 billion
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The following chart provides a geographic breakdown of the
Industry Sectors external revenue in fiscal 2010.
The Industry Automation Division offers automation
systems such as programmable logic controllers and process
control systems, sensors such as process instrumentation and
analytics, and industrial software such as product lifecycle
management and manufacturing execution systems software. The
Divisions portfolio ranges from standard products and
systems for the manufacturing, processing and construction
industries to solutions for entire industrial vertical markets,
including automation solutions for entire automobile production
facilities and chemical plants. At the beginning of fiscal 2010,
the Divisions low-voltage switchgear business was
transferred to the Building Technologies Division.
The Drive Technologies Division offers integrated
technologies that cover a wide range of drive applications with
electrical components such as standard motors and drives for
conveyor belts, pumps and compressors, heavy duty motors and
drives for rolling steel mills, compressors for oil and gas
pipelines and mechanical components such as gears for wind
turbines and cement mills. Drive Technologies offers products
such as automation systems and services for production machinery
and machine tools. The Divisions portfolio includes
standard products as well as industry-specific control and drive
solutions for wind power, metal forming, printing and electronic
manufacturing as well as solutions for manufacturers of glass,
wood, plastic, ceramic, textile and packaging equipment and
crane systems.
The Building Technologies Division offers products,
services and solutions for commercial, industrial, public and
residential buildings, including building automation, comfort,
building safety and security, low-voltage switchgear such as
circuit protection and distribution products, and building
operations. In addition, the Division offers energy solutions,
aiming to improve a buildings energy cost, reliability and
performance while minimizing its impact on the environment. The
Divisions broad range of offerings includes heating and
ventilation controls, security systems and devices such as
intruder detection, video surveillance and building access
control, fire safety solutions such as fire detection,
protection alarm systems and non-water based fire extinguishing,
and electrical installation equipment for buildings such as
low-voltage switchgear, sockets and circuit breakers. The
low-voltage
20
switchgear business was transferred from the Industry Automation
Division to the Building Technologies Division at the beginning
of fiscal 2010.
OSRAM supplies lighting solutions for all aspects of life
and living environments, providing its customers with an
extensive product portfolio of lamps such as incandescent,
halogen, compact fluorescent, fluorescent, high-intensity
discharge and Xenon lamps, opto-electronic semiconductor light
sources such as light emitting diodes (LEDs), organic LEDs, high
power laser diodes, LED systems and LED luminaires, relevant
electronic equipment such as electronic ballasts and lighting
control and management systems as well as precision material and
components. These products are used in applications in
households, industrial and commercial applications, and public
spaces and infrastructure.
The Industry Solutions Division is Siemens systems
integrator and solutions provider for industrial plant
businesses, covering planning, construction, operation and
maintenance over a plants entire lifecycle. With its water
processing and raw material processing systems, the Division
helps to increase the productivity and competitiveness of
enterprises in various industries and to meet the need for
environmentally compatible solutions. Its processes and systems
are applied in the iron and steel production, pulp and paper,
cement, marine and mining industries. We also offer equipment
for the treatment of potable water and wastewater such as
membranes and lab water/high purity water systems, treatment and
outsourcing solutions for industrial wastewater, electrical and
automation solutions for municipal wastewater and water
transport as well as water treatment services.
The Mobility Divisions goal is to network distinct
transportation systems with one another to move people and goods
efficiently. The Division combines Siemens products,
solutions and services in operating systems for rail
transportation such as central control systems, interlockings
and automated train controls, for road traffic including traffic
detection, information and guidance, for airport logistics
including cargo tracking and baggage handling, for postal
automation including letter parcel sorting, and for rail
electrification, as well as rail vehicles for mass transit,
regional, long-distance transportation, and locomotives. At the
beginning of fiscal 2010, the Division closed the sale of its
airfield lighting business.
The Industry Sectors principal customers are
industrial, infrastructure and governmental customers in a broad
range of markets, including construction and real estate,
transportation and logistics, metals and mining, machinery,
utilities and automotive. The Sector is active globally,
including in emerging markets, especially those in the
Asia-Pacific region, which management believes have significant
growth potential. Apart from the Siemens Brand, the Sector
markets some parts of its portfolio under different brand names
(such as OSRAM and Sylvania for lighting products or Flender for
gears), depending on geography and technology.
The Sector sells its products primarily through dedicated
personnel in Siemens worldwide network of regional sales
units. In addition, it uses original equipment manufacturers,
solution providers, installers, general contractors, third-party
distributors and independent agents. Its small project
businesses (e.g., the businesses of its Building Technologies
Division) have a decentralized business organization with a
local branch network to deliver solutions to their customers
directly.
The large size of some of the Sectors projects (especially
in the Mobility Division and in parts of the Industry Solutions
and Building Technologies Divisions) occasionally exposes it to
risks related to technical performance or specific customers or
countries. In the past, the Sector has experienced significant
losses on individual projects in connection with such risks. For
additional information on these risks, see Item 3:
Key information Risk factors.
The Sector has manufacturing locations worldwide, especially
throughout North and South America, Western and Eastern Europe,
and Asia, allowing it to stay close to its major customers and
keep shipping charges low. In recent years, material costs have
been negatively affected by significant price volatility for
metals, energy and other raw materials. The Sector continues to
work on reducing the use of hazardous materials (e.g., mercury
or lead) and to replace them in its products and processes.
Sustainable products, such as energy-saving lamps and LEDs,
coking coal free iron production processes (COREX), energy
efficient motors and energy management play a major role in its
innovation strategy.
21
Average product lifetimes in the Sectors product
businesses tend to be short (typically ranging from one to five
years from introduction) and are even shorter where software and
electronics play an important role. The lifecycles in the
solutions businesses tend to be longer, as the Sector supports
its customers with significant service through the whole life of
their infrastructures. The timing and extent to which a Division
of the Industry Sector is affected by economic cycles depends
largely on the kind of business activities it conducts.
Divisions where business activities tend to react very quickly
to changes in the overall economic environment include Industry
Automation, OSRAM and those business activities of Drive
Technologies that serve customers in the manufacturing
industries. Divisions where business activities are generally
impacted later by the changes in the overall economic
environment include Building Technologies, Industry Solutions
and those business activities of Drive Technologies that serve
customers in process industries as well as in the energy and
infrastructure sector. The development of markets served by our
Mobility Division is primarily driven by public spending.
Customers of our Mobility Division usually have multi-year
planning and implementation horizons. Our Mobility Division
therefore tends to be independent of short-term economic trends.
No single competitor has a broad business portfolio similar to
that of the Industry Sector. The Sectors principal
competitors with broad portfolios are multinational companies
such as ABB, Alstom, Bombardier, Emerson, General Electric,
Honeywell, Johnson Controls, Philips, Schneider Electric and
Tyco. In the industries in which the Sector is active
consolidation is occurring on several levels. In particular,
suppliers of automation solutions have supplemented their
activities with actuator or sensor technology, while suppliers
of components and products have supplemented their portfolio
with adjacent products for their sales channels.
The main competitors of the Industry Automation Division
are ABB, Schneider Electric, Rockwell and Emerson Electric.
Within its product lifecycle management business, the Division
also competes with, among others, Dassault Systemes and PTC.
Competitors of the Drive Technologies Division include
companies with broad business portfolios such as ABB, Emerson
and Mitsubishi Electric but also specialist companies such as
Fanuc, SEW and Baldor. For the Building Technologies
Division, the main global competitors of its solutions
businesses are large system integrators such as Tyco, Honeywell,
Johnson Controls, UTC and Bosch as well as Schneider Electric in
some markets. The security business is also facing increased
competition from information technology (IT) integrators due to
the convergence of physical and IT security. The main
competitors of the Divisions products business are large
multi-national suppliers such as GE, Johnson Controls,
Honeywell, Bosch and Schneider Electric. It also faces
competition from niche competitors and from new entrants, such
as utility companies and consulting firms, exploiting the
fragmented energy efficiency market. In the worldwide lighting
market, as a result of acquisitions and consolidations over the
last decades, OSRAM, Philips and General Electric are the
key players in traditional lighting. In addition, there are
several new entrants, especially in China. Within its LED
business, the Division competes with among others Nichia,
Philips and Cree. Competitors of the Industry Solutions
Division vary by business area and region. They range from
large, diversified multinational to small, highly specialized
local companies. The Divisions main international
competitors include ABB, General Electric, SMS, Danieli and
Veolia. The Mobility Division competes in its industry
globally with a relatively small number of large companies and
with numerous small to midsized competitors who are either
active on a regional level or specialize within narrow product
spectrums. Mobilitys principal competitors are Alstom and
Bombardier.
Moreover, the Sectors Divisions compete with many
specialized or local companies, particularly in the European,
Chinese and Indian markets. Asian competitors are generally
focused on large-scale production and cost cutting. European
competitors are focused on high quality lifecycle service.
Nevertheless, most major competitors have established global
bases for their businesses. In addition, competition in the
field has become increasingly focused on technological
improvements and price. Intense competition, budget constraints
and rapid technical progress within the industry place
significant downward pressure on prices. In addition,
competitors continuously shift their production to low-cost
countries.
Energy
The Energy Sector offers a wide spectrum of products, services
and solutions for the generation, transmission and distribution
of power, and the extraction, conversion and transport of oil
and gas. It primarily addresses the needs of energy providers,
but also serves industrial companies, particularly in the oil
and gas industry. The Energy
22
Sector covers the whole energy conversion chain. The Sector
consists of six Divisions: Fossil Power Generation, Renewable
Energy, Oil & Gas, Energy Service, Power Transmission
and Power Distribution. Financial results of the Energy Service
Division are reflected in the Fossil Power Generation Division,
the Oil & Gas Division and the Renewable Energy
Division and are therefore not reported separately.
The following table provides key financial data concerning the
Energy Sector.
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Year ended
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|
|
September 30, 2010
|
|
Total revenue
|
|
25.520 billion
|
External revenue
|
|
25.204 billion
|
External revenue as percentage of Siemens revenue
|
|
33.17%
|
Sector profit
|
|
3.562 billion
|
The following chart provides a geographic breakdown of the
Energy Sectors external revenue in fiscal 2010.
The Fossil Power Generation Division offers
high-efficiency products and solutions for fossil-based power
generation. The offering extends from gas and steam turbines and
generators to complete turnkey power plants. The Division
concentrates on gas and steam turbines and turbo generators,
including control systems, in the larger power range, with an
emphasis on combined-cycle gas, steam power plants and
conventional islands for nuclear power plants. It also develops
solutions for instrumentation and control systems for all types
of power plants and for use in power generation, including
information technology solutions providing management
applications from the plant to the enterprise level and is
working on the development and production of systems based on
emerging technologies such as integrated gasification and carbon
capture and storage. During fiscal 2009, the Division
successfully finalized trial operations on the worlds
largest and most powerful gas turbine in Irsching near
Ingolstadt, Germany, which is currently being converted into a
high-efficiency combined-cycle power plant and is expected to
commence commercial operations in calendar year 2011. Fossil
Power Generation has stakes in other companies such as our
minority stakes in Areva NP in the nuclear power sector, which
is currently being divested, and the Russian power plant
supplier Power Machines. The Division is also represented in a
number of joint ventures in China, including Shanghai Electric
Power Generation Equipment where Fossil Power Generation
recently increased its stake from 34% to 40%. Siemens is
currently in the process of terminating the shareholders
agreement of the joint venture Areva NP, and selling its 34%
interest in Areva NP to the majority shareholder Areva S.A.
under the terms of a put agreement. For additional information,
see Legal proceedings.
The Renewable Energy Division provides solutions for the
production of electricity from renewable energy sources,
including wind, solar thermal energy and photovoltaic. In the
rapidly growing global wind power market, the Division builds
wind turbines from 2.3 megawatts to 3.6 megawatts with rotor
diameters spanning 82 to 120 meters for on- and offshore
applications, provides services to off- and onshore wind farms
and, in coordination with other Divisions within the Energy
Sector ensures the efficient linking of wind farms to power
grids. In the photovoltaic industry, the Division focuses on
ground-based and large roof top systems above 1 megawatt-peak.
To strengthen Renewable Energys position in the solar
thermal energy market, we acquired Solel Solar Systems Ltd. in
the first quarter of fiscal 2010. The Division provides
receivers, solar fields and turnkey solutions for solar thermal
power plants, partly in cooperation with the Fossil Power and
the Oil & Gas Division. In addition to its
participations in the wind and solar power business, Siemens
holds a minority stake in a joint venture in hydropower
generation, Voith Hydro Power Generation.
23
The Oil & Gas Division supplies high-efficiency
products and on- and offshore solutions for the production
transport and processing of oil, gas and water, which are used
in the oil and gas industries, the petrochemical and chemical
industries as well as other industries. The portfolio includes
high-efficiency steam and gas turbines, including control
systems, in the small and medium range; it also includes
turbocompressors for a broad range of applications. The
Oil & Gas Division further offers a variety of power
generation and distribution solutions, process and automation
technology and integrated IT solutions. The Divisions
activities encompass design, engineering and supply.
The Energy Service Division offers comprehensive
services, including parts and components, for complete power
plants including on- and offshore wind farms as well as rotating
machines such as gas and steam turbines, generators and
compressors. It provides these services using advanced plant
diagnostics and systems engineering. The Division also offers
power plant maintenance and operation services and emissions
control services and systems. All financial results relating to
the Division are reflected in the Fossil Power Generation
Division, the Oil & Gas Division and the Renewable
Energy Division and are therefore not reported separately.
The Power Transmission Division covers high-voltage
transmission solutions, power transformers, high-voltage
switching products and systems, and innovative alternating and
direct current transmission systems. The Division supplies
energy utilities and large industrial power users with
equipment, systems and services used to process and transmit
electrical power from the source, typically a power plant, to
various points along the power transmission network. In the
power transmission process, electricity generated by a power
plant is transformed to a high voltage that can be transported
efficiently over long distances along overhead lines or
underground or subsea cables. This voltage
step-up
occurs at or near the site of the power plant, and requires
transformation, control, transmission, switching and protection
systems. High-voltage power then passes through one or more
substations, which use distribution switchgear to control the
amounts delivered, circuit breakers and surge arresters to
protect against transmission hazards and transformers to reduce
the voltage to a medium level for safe distribution in populated
areas. Since October 2007, the Division has secured key
components through a joint venture with Infineon Technologies in
Germany for design, manufacturing and sale of high performance
semiconductors.
The Power Distribution Division combines medium-voltage
components, systems and solutions, power automation solutions
and products as well as services for power equipment and
transmission and distribution networks. The Division supplies
energy utilities and large industrial power users with
equipment, systems and services used to process and distribute
power via a distribution grid to the low voltage grid and the
end user, respectively. Metering systems measure and record the
locations and amounts of power transmitted.
The Power Transmission and Power Distribution Divisions together
provide customers with turnkey power transmission systems and
distribution substations, discrete products and equipment for
integration by the Sectors customers into larger systems,
information technology systems and consulting services relating
to the design and construction of power transmission and
distribution networks. These offerings include power systems
control equipment and information technology systems,
transformers, high-voltage products and power equipment for both
alternating and direct current transmission systems; protection
and substation control systems; and medium-voltage equipment,
including circuit breakers and distribution switchgear systems
and components. In fiscal 2010, Siemens divested its stake in
Capital Meters Holdings Ltd.
In addition to equipment and systems, the Power Transmission and
Power Distribution Divisions offer a growing range of services
and integrated solutions for various stages in the power
transmission and distribution process. They provide analytical
and consulting services, as well as equipment and systems in the
power quality field that are designed to improve the
availability and reliability of power transmitted by analyzing
and reducing the causes of power fluctuations and failures.
Power quality systems and services have become increasingly
important with the growing use of sensitive computerized,
electronic and other equipment requiring continuous power with
very little fluctuation in voltage or frequency. As a leading
international supplier of intelligent power networks, or smart
grids, which use digital technology to improve power
reliability, unite large, centralized generation units with
small, decentralized ones and achieve cost and energy savings,
the Power Transmission and Power Distribution Divisions are
responding to and anticipating these market trends. The Sector
continues to strengthen its smart grid portfolio across the
entire energy conversion chain and aims to capture a significant
portion of the market, which it expects to grow in coming years
due to climate change and rising energy demands as well as
liberalized energy
24
markets and economic stimulus programs. In fiscal 2010, Siemens
launched the company project Smart Grid Applications and formed
three regional units to market new Smart Grid Applications. In
addition, a global unit will develop and market new products and
applications for electromobility solutions including the last
mile to the customer.
The Energy Sector distributes its products and services
through its own dedicated sales force, supported by
Siemenss worldwide network of regional companies.
Additional sales channels include joint ventures and license
partners, especially in markets requiring a high degree of local
knowledge.
Overall, the Sectors principal customers are large power
utilities and independent power producers and power
distributors, construction engineering firms and developers. Due
to ongoing deregulation in the power industry, its customer base
continues to diversify from one formerly composed almost
exclusively of power utilities responsible for all stages of
power generation, transmission and distribution to one that
includes an increasing number of independent system operators
and power distributors supplying services at different points of
the power generation, transmission and distribution network.
Because certain significant areas of the Sectors business,
such as power plant construction, involve working on medium- or
longer-term projects for customers who may not require the
Sectors services again in the short term, the
Sectors most significant customers tend to vary
significantly from year to year.
The Energy Sectors business activities vary widely in size
from component delivery and comparatively small projects to
turnkey contracts for the construction of new power plants with
contract values of more than 0.5 billion each. The
large size of some of the Sectors projects occasionally
exposes it to risks related to technical performance, a customer
or a country. In the past, the Sector has experienced
significant losses on individual projects in connection with
such risks. For additional information about our long-term
contracts, see Item 3: Key information
Risk factors. Moreover, the Sector generates an increasing
proportion of its revenue from oil and gas activities and
industrial customers in the developing world. While this region
represents a growth market for power generation, transmission
and distribution products and systems, the Sectors
activities in that region expose it to risks associated with
economic, financial and political disruptions that could result
in lower demand or affect customers abilities to pay.
The Sectors competitors vary by Division. The Fossil
Power Generation Divisions market consists of a
relatively small number of companies, some with very strong
positions in their domestic markets. Its principal competitors
in gas turbines are General Electric, ALSTOM Power and
Mitsubishi Heavy Industries, whereas its main competitors in
steam turbines are ALSTOM Power, Bharat Heavy Electricals
Limited, Toshiba and General Electric. In China, manufacturers
are mainly focused on their large home market, but have recently
begun to transform from local to international suppliers. The
Division aims to participate in this growth through a Chinese
joint venture. Korean engineering and procurement companies
offer a large product and solutions range and establish
themselves as one-stop-shops which offer customer solutions out
of one hand. In instrumentation and controls, ABB is the
Divisions principal competitor. The principal competitors
of the Renewable Energy Division in the growing wind
turbine market are Vestas, General Electric, Gamesa, Enercon and
Suzlon with smaller and low-cost competitors, especially from
China, increasingly challenging the dominant players large
market share. Within the solar thermal energy market, the
Divisions main competitor for products is Schott Solar, a
producer of receivers. In the photovoltaic business, competitors
are fully integrated companies such as Solarworld. The
Oil & Gas Division faces a mix of competitors,
some with strong global market positions and some with a solid
regional focus playing a key role; the Division is further
seeing the expansion of some competitors from their home
countries, as they seek to develop a global presence. Its
principal competitors vary by product; in automation and
controls, they are ABB, Honeywell and General Electric whereas
in compressors and steam and gas turbines, they are General
Electric, Solar, MAN Turbo and Dresser Rand. The primary
competitors of the Power Transmission and Power
Distribution Divisions are a small group of large,
multinational companies offering a wide variety of products,
systems and services. The Power Transmission Divisions key
global competitors are ABB and Alstom, which took over
Arevas transmission business in 2010. Further competition
comes from regional and niche manufacturers, such as Toshiba,
China XD, Crompton Greaves or Tebian Electric Apparatus Stock
Co., and, increasingly, local competitors in low-cost countries
such as China and India. The Power Distribution Division holds a
leading position in its markets. Its key competitors are ABB,
Schneider and Areva, as well as regional
25
competitors in certain markets such as China and India where
local competitors have lately also begun to venture into export
markets. Increasing international competition from local and
regional competitors in low-cost countries is one of the reasons
why the Power Transmission and Power Distribution Divisions have
entered into several joint ventures in China, which is the
Sectors largest single power transmission and distribution
market.
Healthcare
The Healthcare Sector offers customers a comprehensive portfolio
of medical solutions across the value-added chain
ranging from medical imaging to in vitro diagnostics to
interventional systems and clinical information technology
systems all from a single source. In addition, the
Sector provides technical maintenance, professional and
consulting services, and, together with Siemens Financial
Services, financing to assist customers in purchasing the
Sectors products.
The following table provides key financial data concerning the
Healthcare Sector.
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Year ended
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September 30, 2010
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Total revenue
|
|
12.364 billion
|
External revenue
|
|
12.280 billion
|
External revenue as percentage of Siemens revenue
|
|
16.16%
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Sector profit
|
|
748 million
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The following chart provides a geographic breakdown of the
Healthcare Sectors external revenue in fiscal 2010.
During fiscal 2010, Siemens initiated a change of the
organizational structure of its Healthcare Sector with effect
from October 1, 2010 as described below. Financial
reporting for fiscal 2010 continued to be based on the
organizational structure effective until September 30,
2010, which comprised the following three Divisions:
The Imaging & IT Division comprised medical
imaging systems, including x-ray, computed tomography, magnetic
resonance, molecular imaging and ultrasound, which are used to
generate morphological and functional images of the human body.
This information is used both for diagnostic purposes and in
preparation for potential treatment, including interventional
and minimally invasive procedures. The Division also offered
computer-based systems, workstations and software, enabling
healthcare professionals to retrieve, process and store the
patients imaging information. In addition, the Division
offered hospital information systems, which allow to digitally
store, retrieve and transmit all relevant clinical and
administrative information, and which are used to facilitate and
optimize clinical workflows by our customers. The Division was
also active in computer-based decisions support systems and
knowledge-based technologies for assisting doctors with the
diagnosis of diseases.
The Workflow & Solutions Division provided
integrated solutions for areas such as cardiology, oncology,
womens health, urology, surgery and audiology. The
portfolio included oncology care systems, including linear
accelerator and particle therapy technologies used in cancer
treatments, x-ray imaging systems for mammography and surgery
applications as well as urology systems, and audiology products
(hearing aids) and related products and supplies. The Division
also provided product-related services for the Sectors
imaging and therapeutic equipment and consulting services.
26
The Diagnostics Division offers products and services in
the area of in vitro diagnostics. In vitro diagnostics is
based on the analysis of bodily fluids such as blood or urine
and supplies vital information for the detection and management
of disease as well as an individual patients risk
assessment. The Divisions portfolio represents a
comprehensive range of diagnostic testing systems and
consumables, including clinical chemistry and immunodiagnostics,
molecular diagnostics (i.e., testing for nucleic acids),
hematology, hemostasis, microbiology,
point-of-care
testing and clinical laboratory automation solutions. During the
fourth quarter of fiscal 2010, we completed a strategic review
that reassessed the medium-term growth prospects and long-term
market development of the laboratory diagnostics business, and
subsequently announced a preliminary estimate of goodwill
impairment charges. Following completion of the annual
impairment test, Diagnostics took impairment charges at the
close of the fourth quarter of fiscal 2010 of
1.204 billion, including 1.145 billion for
goodwill, which was below the previously announced estimate
primarily due to currency translation effects.
Following the reorganization which took effect as of
October 1, 2010, the Healthcare Sector comprises the
following three Divisions, one Operating Unit and one separate
Business Unit reporting directly to the Sector.
The Imaging and Therapy Systems Division merges the
business with large-scale medical devices for diagnostic
imaging, which was previously included in the
Imaging & IT Division, and therapy solutions, which
was previously included in the Workflow & Solutions
Division and Imaging & IT Division. The new Division
reflects the trend of increasing integration between imaging and
therapy systems and is intended to further strengthen
Siemens leading position in these markets. The Clinical
Products Division mainly comprises the business with
ultrasound, mammography and x-ray equipment, which was
previously included in the Imaging & IT Division and
Workflow & Solutions Division. In addition to
providing innovative high-end solutions, the Clinical Products
Division focuses on the development of cost-efficient, less
complex equipment that meets essential customer requirements,
particularly in emerging economies. The Clinical Products
Division also comprises the internal supplier Components and
Vacuum Technology which also provides components to the
Division Imaging & Therapy Systems. The scope of
the Diagnostics Division remains unchanged, comprising
the in vitro diagnostics business. The Sector Operating
Unit Customer Solutions manages sales and services as
well as the Business Unit covering hospital information systems.
Audiology provides hearings aids and is independently
managed as a Sector Business Unit.
The customers of the Healthcare Sector include healthcare
providers such as hospital groups and individual hospitals,
group and individual medical practices, reference and physician
office laboratories and outpatient clinics. The Sector sells the
majority of its products and services through in-house sales
staff, which is now grouped in its Customer Solutions Operating
Unit, supported by dedicated product specialists. In some
countries, it also uses dealers, particularly for the sale of
low-end products (such as low-end ultrasound and x-ray
equipment). In vitro diagnostics products and services are
primarily sold through the Sectors dedicated diagnostics
sales force, which is now also grouped within the Sectors
Customer Solutions Operating Unit, while in some regions dealers
are used. A small portion of the Sectors sales revenue
derives from the delivery of products and components to
competitors on an original equipment manufacturer (OEM) basis.
The Sectors products are serviced primarily by its own
dedicated personnel.
The Healthcare Sector faces market risks in connection with
ongoing health care reform efforts. In the United States, a
new health care reform was enacted in the spring of 2010. In
particular, an excise tax will be charged on certain medical
devices. Siemens believes that this tax will mainly impact the
computed tomography and magnetic resonance business.
The Healthcare Sector has research and development and OEM
cooperation agreements with various companies, including Bruker
in the field of magnetic resonance imaging, Toshiba, Mochida,
National Semiconductor and Biosense Webster in the field of
ultrasound, and Toshiba in the field of magnetic resonance
imaging. The Sector is also party to several joint ventures,
including with Philips and Thales to manufacture flat panel
detectors for medical imaging. In fiscal 2010, Siemens sold its
25% stake in Dräger Medical AG & Co. KG to the
majority shareholder, Drägerwerk AG & Co. KGaA.
Through this joint venture Siemens provided electromedical
systems, such as patient monitoring and anesthesia systems.
27
The Healthcare Sectors principal competitors in medical
imaging are General Electric, Philips, Toshiba, Hitachi and
Hologic. Other competitors include McKesson and Cerner for
healthcare information technology systems, Sonova (formerly
Phonak), William Demant, GN Resound and Starkey for audiology
(hearing aids), Elekta and Varian Medical for oncology care
systems, and Roche, Abbott and Beckman Coulter for in vitro
diagnostics. The trend toward consolidation in the Sectors
industry continues. Competition among the leading companies in
the field is strong, including with respect to price.
Equity
Investments
In general, the segment Equity Investments comprises equity
stakes held by Siemens that are accounted for by the equity
method, at cost or as current
available-for-sale
financial assets and are not allocated to a Sector, a
Cross-Sector Business, Centrally managed portfolio activities,
SRE, Pensions or Corporate Treasury for strategic reasons.
The main investments within Equity Investments are:
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A stake of approximately 50.0% in Nokia Siemens Networks B.V.
(NSN), Netherlands: NSN began operations in the third
quarter of fiscal 2007 and includes the carrier-related
operations of Siemens and the Networks Business Group of Nokia.
NSN is a leading supplier in the telecommunications
infrastructure industry.
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A 50.0% stake in BSH Bosch und Siemens Hausgeräte GmbH
(BSH), Germany: BSH is a leading manufacturer of household
appliances, offering an extensive range of innovative products
tailored to customer needs and global megatrends alike. BSH was
founded as a joint venture in 1967 between Robert Bosch GmbH and
Siemens.
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A 49.0% stake in Krauss-Maffei Wegmann GmbH & Co.
KG, Germany, which holds a leading position in the defense
technology market.
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|
A 50.0% stake in ELIN GmbH & Co. KG, Austria, a
provider of technical building equipment and installation
services.
|
|
|
|
A 49.0% stake in Enterprise Networks Holdings B.V.,
Netherlands, a provider of open communications, network and
security solutions to enterprise customers.
|
|
|
|
A 19.8% stake in GIG Holding GmbH, formerly named ARQUES
Value Development GmbH, Germany, which owns all shares of
Gigaset Communications GmbH (GC). GC focuses on cordless phones
and broadband and home entertainment devices.
|
For additional information on investments held in Equity
Investments, see Item 5: Operating and financial
review and prospects Fiscal 2010 compared to fiscal
2009 Segment information analysis Equity
Investments, Item 7: Major shareholders and
related party transactions Related party
transactions, as well as Notes to Consolidated
Financial Statements.
Siemens
IT Solutions and Services
Siemens IT Solutions and Services designs, builds and operates
both discrete and large-scale information and communications
systems. As a Siemens Cross-Sector Business, Siemens IT
Solutions and Services offers comprehensive information
technology and communications solutions from a single source
both to third parties and to other Siemens entities and their
customers. While mainly performing operations related services,
it also creates solutions for customers by drawing on its
management consulting resources to redesign customer processes,
on its professional services to integrate, upgrade, build and
install information technology systems and on its operational
capabilities to run these systems on an ongoing basis. As of
October 1, 2010, Siemens IT Solutions and Services was
carved out of Siemens AG as a separate legal entity which is a
wholly owned consolidated subsidiary of Siemens. Siemens IT
Solutions and Services incurred significant charges in
connection with measures to reduce its workforce by around 4,200
jobs worldwide.
28
The following table provides key financial data concerning
Siemens IT Solutions and Services.
|
|
|
|
|
Year ended
|
|
|
September 30, 2010
|
|
Total revenue
|
|
4.155 billion
|
External revenue
|
|
3.150 billion
|
External revenue as percentage of Siemens revenue
|
|
4.15%
|
Profit
|
|
(537) million
|
The following chart provides a geographic breakdown of Siemens
IT Solutions and Services external revenue in fiscal 2010.
In its current form, Siemens IT Solutions and Services offers
its solutions and services to external customers in the
following areas:
|
|
|
|
|
Industry-Energy-Healthcare, which includes the
automotive, discrete manufacturing, mobility and process
industries as well as the energy and healthcare markets;
|
|
|
|
Public sector, which includes defense &
intelligence, public security, employment services and public
administration; and
|
|
|
|
Service industries, which includes customers in
telecommunications and internet services, media, and financial
and consulting services.
|
On a combined basis, Siemens is the largest customer of Siemens
IT Solutions and Services, accounting for 24% of total revenue
in fiscal 2010.
The types of services we offer include:
|
|
|
|
|
project-oriented consulting, design and implementation services,
such as selecting, adapting and introducing new solutions to
support business processes, as well as integration of systems
and enterprise applications;
|
|
|
|
outsourcing services (full-scale IT operations spanning hosting,
call center, network and desktop services) as well as operation
of selected business processes (e.g., financial services
back-office operations); and
|
|
|
|
software development such as design and implementation of
software solutions for external customers.
|
At the beginning of fiscal 2011, software development solutions
for the telecommunication industry were transferred from Siemens
IT Solutions and Services to Centrally managed portfolio
activities, a reconciliation item within Siemens segment
information, introduced at the beginning of fiscal 2010.
Siemens IT Solutions and Services solutions and services
are designed to support its customers in the following areas:
|
|
|
|
|
customer relationship management, to assist businesses in
aligning their organizations to better serve the needs and
requirements of their customers;
|
|
|
|
business information management, to improve our customers
business processes, including services and solutions for
business information, document and product data management;
|
29
|
|
|
|
|
supply chain management, to facilitate the efficient interplay
of all of a business operational processes with those of
its suppliers;
|
|
|
|
enterprise resource management, to optimize a customers
internal management and production processes;
|
|
|
|
e-commerce
systems and solutions in a range of industries, to allow
customers to offer a variety of Internet-based services through
design and implementation of software for communications and
transactions applications; and
|
|
|
|
environmental solutions, designed to reduce the environmental
impact of customers business processes, products and
services, including solutions designed to prevent pollution and
to optimize energy consumption and utilization.
|
At the beginning of fiscal 2010, Siemens IT Solutions and
Services completed the acquisition of a 60% stake in Energy4U
GmbH, Elbtal, Germany, a specialist in IT consulting services
for utilities.
Most of Siemens IT Solutions and Services consulting and
design services involve information technology and
communications systems that Siemens also builds and operates
itself. At the same time, Siemens IT Solutions and Services also
designs and builds systems and provides services using the
software of several companies with which it has established
relationships, such as Microsoft, SAP, Fujitsu and VMware.
The largest external customers of Siemens IT Solutions and
Services in fiscal 2010 included BBC, BWI Informationstechnik,
National Savings & Investments and Nokia Siemens
Networks (NSN).
Siemens IT Solutions and Services has its own sales force and
operates worldwide in more than 40 countries.
Because Siemens IT Solutions and Services routinely enters into
large-scale and sometimes long-term projects, it occasionally
becomes exposed to risks related to technical performance or
specific customers or countries. Therefore, risks associated
with long-term contracts remain a management priority at Siemens
IT Solutions and Services. For additional information on these
risks, see Item 3: Key information Risk
factors.
Siemens IT Solutions and Services competitors vary by
region and type of service. A few of them are global,
full-service IT providers such as IBMs Global Services
division, Accenture, CSC and HP Services. One of Siemens IT
Solutions and Services competitors with a more narrow
focus on specific regions or customers is T-Systems, a unit of
Deutsche Telekom, which is based in Germany. As a service
business, Siemens IT Solutions and Services requires a strong
local presence and the ability to build close customer
relationships and provide customized solutions while achieving
economies of scale and successfully managing risks in large
projects.
The IT services market is expected, according to Gartner, Inc.,
to show stronger growth in 2011 than in 2010 and growth is
expected to return to levels seen before the global financial
crisis after 2011. The market will, however, continue to be
highly competitive and fragmented. Siemens IT Solutions and
Services is expected to return to annual growth rates at market
level starting in 2012.
Siemens
Financial Services (SFS)
As a Siemens Cross-Sector Business, Siemens Financial Services
(SFS) provides a variety of financial services and products both
to third parties and to other Siemens entities and their
customers. We are comprised of six business units, which can be
classified as either capital businesses (consisting of the
Commercial Finance
Europe/APAC
business unit (COFEA), the Commercial Finance U.S. business
unit (COFUS) and the Equity component of the Equity
Investment & Project Finance business unit) or fee
businesses (consisting of the Treasury business unit, the
Financing Services & Investment Management business
unit, the Insurance business unit and the Project and Export
Finance component of the Equity Investment & Project
Finance business unit). The capital businesses support Siemens
sales with leasing and lending programs and offer a broad range
of financial solutions, including direct financing, to vendors
and their business customers. Our finance products include
finance leases, operating leases, hire purchases and rental
contracts as well as structured loans. The capital businesses
also make equity investments, mainly in infrastructure projects
where Siemens acts as the principal supplier. SFS capital
business is originated from Siemens as well as third party
vendors and customers and is focused around Energy,
30
Industry and Healthcare as areas with Siemens domain
expertise. The fee businesses support and advise Siemens in
matters concerning financial risk and investment management and
provide an important contribution to Siemens by arranging
financing for Siemens projects. Most of SFS fee business
is generated internally (i.e., with other Siemens entities as
the customer).
In its transactions with Siemens and third parties, SFS acts
consistent with banking industry standards in the international
financial markets that are both applicable and mandatory for
these transactions. In fiscal 2010, Siemens filed an application
with the German Federal Financial Supervisory Authority
(Bundesanstalt für Finanzdienstleistungsaufsicht
BaFin) for the grant of a license to conduct
banking business. The authority is currently reviewing the
application. With the help of a licensed credit institution,
Siemens would aim to expand the product portfolio of SFS,
particularly in the sales finance area, to add flexibility to
Group financing and to optimize its risk management.
The following table provides key financial data concerning SFS.
|
|
|
|
|
Year ended
|
|
|
September 30, 2010
|
|
Total assets
|
|
12.506 billion
|
Total assets as percentage of Siemens assets
|
|
12.16%
|
Income before income taxes
|
|
447 million
|
COFEA and COFUS offer a comprehensive range of
asset finance, leasing, rental and related financing solutions
to organizations of all sizes to finance equipment purchased
from Siemens or third-party providers or to finance growth and
working capital needs. COFEA and COFUS leverage technical
expertise and long-term relationships with other Siemens
entities to create integrated financial solutions that
complement the Siemens portfolio across the Healthcare, Industry
and Energy Sectors and Siemens IT Solutions and Services.
Services are provided through a network of COFEA and COFUS
companies, located in 16 countries throughout Europe, Asia
Pacific and North America, comprising regulated, partially or
non-regulated entities. COFEA plans to establish a non-banking
financial company in India and is currently in the process of
seeking the required regulatory approvals. Refinancing of SFS
COFEA/COFUS entities is mainly conducted by Siemens treasury
units.
COFEA products comprise finance and operating leases, hire
purchases, rentals, structured loans and very limited
forfaiting. Structured solutions range from senior secured
corporate loans and structured investment financing to
infrastructure and project financing and acquisition, leveraged
buyouts (LBO) and growth financing, typically as syndicated
loans. SFS COFUS provides similar products in asset financing
with a strong focus on senior secured lending and, to a lesser
extent, other debt instruments to the Energy Sector, big ticket
leasing for transportation and manufacturing assets in the
Industry Sector and a growing portfolio in secured acquisition
financing. COFUS asset-based lending solutions are mainly
secured by receivables and inventory.
COFEA serves Siemens and other domestic and international
manufacturers and vendors to allow a risk-balanced portfolio
based on a locally adopted mix of end customers. In addition to
the vendor channel, the business unit mainly serves clients
through direct origination, private equity and project sponsors
as well as through the syndication market. It delivers financing
solutions tailored to customers sales objectives,
distribution channels and processes and supports them through
its local field sales presence in the regions Europe and APAC.
The Equity Investments & Project Finance
business unit encompasses equity investments in
infrastructure projects and small and medium-sized companies as
well as the provision of advisory and other services to other
Siemens entities. The business unit invests in equity of a broad
range of infrastructure projects. In doing so, it concentrates
on projects with a meaningful role for Siemens technology. Its
investment focus is on power projects (thermal and renewable),
medical projects and other infrastructure projects such as
airports or railways.
In addition, the business unit conducts equity investments in
small and medium-sized companies (venture and growth capital) to
fund cutting-edge technologies and systems, making Siemens and
its customers more competitive by expanding and improving the
products and services offered by Siemens. Energy, healthcare,
and industry, the core domains of Siemens technological
expertise, are investment focal points. The business unit also
offers
31
customers advisory, analytical and selection services related to
investments in private equity funds and manages a venture and
growth capital
fund-of-funds
for institutional investors called Siemens Global Innovation
Partners.
In its advisory role, the business unit supports Siemens Sectors
as well as operating companies and consortia in which Siemens
participates on project and sales financing transactions. To
that end it is assisted by centers of competence, which provide
advice on complex financing topics, including public-private
partnerships as well as forfeiting and export and investment
guarantees. The business unit cooperates with a global network
of financial institutions at both national and international
levels and maintains contacts at special international financing
institutions such as development banks and export credit
agencies (e.g., Euler Hermes, Coface, Sace and USExim). Other
services provided are centered on the issuance and
administration of bonds, guarantees, letters of credit and other
sureties from banks for Siemens.
Effective May 1, 2010, the Treasury and Investment
Management business unit was split into the business units
Treasury and Financing Services & Investment
Management. The reorganization reflects the change of
responsibility for treasury activities.
The Treasury business unit handles all activities which
fall into the sole responsibility of the Corporate Treasurer.
Treasury is mandated by the Corporate Treasurer to provide
treasury services to all Siemens entities. These activities
comprise cash management and payment (including intercompany
payments) services using group-wide tools with central controls
to ensure compliance with internal and external guidelines and
requirements as well as all external Siemens financing
activities (especially capital market financing). In addition,
it pools and manages centralized Siemens interest rate,
certain commodity risk and currency risk exposure and uses
derivative financial instruments in transactions with external
financial institutions to offset such concentrated exposures.
For more information on the use of derivatives to hedge risk,
see Item 11: Quantitative and qualitative disclosure
about market risk.
The Financing Services & Investment Management
business unit consists of receivables management,
third-party treasury advisory and investment management. It is
engaged in the process of monitoring and warehousing short-term
trade accounts receivable (tenor of up to 365 days) under
the roof of Siemens Credit Warehouse. The objective is to
centralize risk management for trade receivables as well as
provide assets for receivables-backed financing. Treasury
advisory provides consulting services and cash management
systems to third-party customers. The investment management
function provides investment management services relating to
pension assets to Siemens as well as to external institutional
clients and via mutual funds to the
general public. It operates its investment business in Germany
and Austria through its companies Siemens
Kapitalanlagegesellschaft mbH (SKAG) and Innovest Kapitalanlage
AG.
The Insurance business unit acts as insurance broker for
Siemens and external customers, providing both industrial
insurance and private finance solutions. In the area of
industrial insurance solutions, the business unit supports
Siemens and non-affiliated companies as a competent partner in
all insurance related matters, including claims management as
well as risk transfer to insurance and financial markets. It
also acts as broker of Siemens-financed insurances for employees
on business trips and foreign assignments. In the area of
private finance solutions, the unit offers a wide range of
products in the areas of insurance, retirement planning and
residential construction financing for staff at Siemens and
non-affiliated companies. Through RISICOM Rückversicherungs
AG, SFS provides reinsurance solutions as integral part of
Siemens risk financing program.
While SFS originates business in its capital business (leasing,
loans, receivables financing, asset-based lending, equity
investments) from external customers either directly or through
the Siemens Sectors or through internal or external vendors, its
fee business is mainly sourced internally from other Siemens
entities. In certain cases, it uses financial intermediaries for
business origination, mainly on secondary markets. Insurance
services are also offered over the internet.
SFS main sources of risk are associated with external
customers credit and its own equity portfolio. While the
effects of the global financial market crisis are still
noticeable, SFS is observing a stabilization of the credit
environment.
32
Most of SFS services are geared towards Europe and North
America. However, SFS is also present in select Asian countries,
especially China, to support Siemens regional companies with
financial services. SFS competition mainly includes
commercial finance operations of banks, independent commercial
finance companies, captive finance companies and asset
management companies. International competitors include General
Electric Commercial Finance, Société General Equipment
Finance, BNP Paribas Equipment Finance and De Lage Landen.
Particularly in the commercial finance business, our competitors
often are local financial institutions and competition therefore
varies from country to country.
As of October 1, 2010, Siemens Financial Services was
renamed Financial Services due to regulatory requirements in
connection with Siemens application in Germany for the
grant of a license to conduct banking business.
Employees
and labor relations
The following tables show the division of our employees by
segments and geographic region as of September 30 for each of
the years shown. Part-time employees are included on a
proportionate basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
Employees by
segments(1)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(in thousands)
|
|
|
Industry
|
|
|
204
|
|
|
|
207
|
|
|
|
220
|
|
Energy
|
|
|
88
|
|
|
|
85
|
|
|
|
83
|
|
Healthcare
|
|
|
49
|
|
|
|
48
|
|
|
|
49
|
|
Siemens IT Solutions and Services
|
|
|
32
|
|
|
|
35
|
|
|
|
41
|
|
Siemens Financial Services
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Other(2)
|
|
|
30
|
|
|
|
28
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
405
|
|
|
|
405
|
|
|
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Continuing operations.
|
|
(2)
|
Includes employees in corporate functions and services and
business units not allocated to any Sector or Cross-Sector
Businesses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
Employees by geographic
regions(1)
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(in thousands)
|
|
|
Europe, C.I.S., Africa, Middle East
|
|
|
240
|
|
|
|
243
|
|
|
|
256
|
|
therein Germany
|
|
|
128
|
|
|
|
128
|
|
|
|
132
|
|
Americas
|
|
|
91
|
|
|
|
91
|
|
|
|
98
|
|
therein U.S.
|
|
|
62
|
|
|
|
64
|
|
|
|
69
|
|
Asia, Australia
|
|
|
74
|
|
|
|
71
|
|
|
|
73
|
|
therein China
|
|
|
34
|
|
|
|
31
|
|
|
|
32
|
|
therein India
|
|
|
17
|
|
|
|
17
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
405
|
|
|
|
405
|
|
|
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Continuing operations.
|
A significant percentage of our manufacturing employees,
especially in Germany, are covered by collective bargaining
agreements determining working hours and other conditions of
employment, and are represented by works councils. Works
councils have numerous rights to notification and of
codetermination in personnel, social and economic matters. Under
the German Works Constitution Act (Betriebsverfassungsgesetz,
BetrVG), works councils are required to be notified in
advance of any proposed employee termination, they must confirm
hiring and
33
relocations and similar matters, and they have a right to
codetermine social matters such as work schedules and rules of
conduct. Management considers its relations with the works
councils to be good.
During the last three years, we have not experienced any major
labor disputes resulting in work stoppages.
Environmental
matters
In each of the jurisdictions in which we operate, Siemens is
subject to national and local environmental and health and
safety laws and regulations that affect our operations,
facilities, products and, in particular, our former nuclear
power generation business. These laws and regulations impose
limitations on the discharge of pollutants into the air, soil
and water and establish standards for the treatment, storage and
disposal of solid and hazardous waste. Whenever necessary,
remediation and clean up measures are implemented and budgeted
accordingly. Because of our commitment to protecting and
conserving the environment and because we recognize that
leadership in environmental protection is an important
competitive factor in the marketplace, we have incurred
significant costs to comply with these laws and regulations and
we expect to continue to incur significant compliance costs in
the future.
In 1994, we closed a site in Hanau, Germany, which we had used
for the production of uranium and mixed-oxide fuel elements. A
smaller related site in Karlstein, where we operated a nuclear
research and service center, was closed in 1989. We are in the
process of cleaning up both facilities in accordance with the
German Atomic Energy Act. We have developed a plan to
decommission the facilities that involves the following steps:
clean-out, decontamination and disassembly of equipment and
installations, decontamination of the facilities and buildings,
sorting of radioactive materials and intermediate and final
storage of radioactive waste. This process will be supported by
ongoing engineering studies and radioactive sampling under the
supervision of German federal and state authorities. We expect
that the process of decontamination, disassembly and sorting of
radioactive waste will continue until 2015. We will be
responsible for storing the material until the
government-developed storage facility becomes available. With
respect to the Hanau facility, the process of setting up
intermediate storage for radioactive waste has neared completion
and the facility has been released from the scope of application
of the German Atomic Energy Act so that its further use is
unrestricted under that Act. However, the State of Hessen still
requires us to monitor the ground water until uranium levels
consistently meet targets set by the State. The ultimate costs
of this project will depend, in part, on where the
government-developed storage facility will be located and when
it becomes available. We set up a provision with respect to this
matter, which at September 30, 2010 amounted to
1,004 million. This provision is based on a number of
significant estimates and assumptions as to the ultimate costs
of this project. During 2010, several parameters were specified
relating to the development of a final storage facility in the
so-called Schacht Konrad. For additional
information, see Notes to Consolidated Financial
Statements.
Some of our products are subject to the Directive 2002/95/EC of
the European Parliament and of the Council on the Restriction of
the Use of Certain Hazardous Substances in Electrical and
Electronic Equipment (the RoHS Directive). The RoHS Directive
bans the use of certain hazardous substances in electrical and
electronic equipment. We are in compliance with current
requirements under the RoHS Directive. Revisions to certain
exemptions from the RoHS Directive were published in September
2010. These revisions introduce certain mercury reduction
requirements that will affect our subsidiary OSRAM GmbH.
The current review of the RoHS Directive and of Directive
2002/96/EC of the European Parliament and of the Council on
Waste Electrical and Electronic Equipment (the WEEE Directive)
by the EU Commission is expected to lead inter alia to changes
in the future scope of the RoHS Directive (e.g. inclusion of
medical equipment beginning in 2014). However, as the review
process is still ongoing and various drafts are currently being
proposed by the European Parliament, the European Council and
the European Commission, a detailed assessment of the overall
impact of the directives on Siemens and of any future financial
obligations is as yet not possible.
Restrictions on the use of certain substances comparable to
those of the RoHS Directive and of the WEEE Directive are under
discussion in several other countries, such as the USA,
Australia, Argentina, China and South Korea.
34
We are also subject to the Regulation (EC) No. 1907/2006 of
the European Parliament and of the Council concerning the
Registration, Evaluation, Authorisation and Restriction of
Chemicals (REACH), which entered into force in part on
June 1, 2007. In the near future we do not expect any
additional risks resulting from REACH because the next measures
to be taken by the European Commission under REACH are expected
to be limited to the imposition of further information
obligations. We will take the necessary measures to comply with
these future obligations.
The experience of the last two years has shown that neither the
Directive 2004/35/CE of the European Parliament and of the
Council on Environmental Liability with Regard to the Prevention
and Remediation of Environmental Damage nor the applicable
remediation measures for damage to protected species and natural
habitats, have yet had any impact on Siemens. Nevertheless we
continue to maintain insurance coverage for these risks, which
is available in the market.
In the United States, certain of our facilities may be required
to obtain operating permits under Title V of the Clean Air
Act Amendments of 1990, which governs certain air quality
standards. The application for permits and related compliance
obligations may require us to incur future costs.
It is our policy to comply with environmental requirements and
to provide workplaces for employees that are safe,
environmentally sound, and which do not adversely affect the
health or environment of their communities. Compliance with
environmental requirements is also a focus of the environmental
audits we conduct. In remediation of the results of recent
environmental audits, additional cost for the implementation and
operation of R&D, production and modified logistic
processes may occur over the next three years. Taking such
remediation measures into account, we believe that we are in
substantial compliance with all environmental and health and
safety laws and regulations. However, there is a risk that we
may incur expenditures significantly in excess of our
expectations to cover environmental liabilities, to maintain
compliance with current or future environmental and health and
safety laws and regulations
and/or to
undertake any necessary remediation.
Environmental
Portfolio
Our Environmental Portfolio may serve as an example of the way
we strive to align our business activities with the
aforementioned megatrends, in this case climate change. The
portfolio contains technologies that reduce impacts on the
environment and minimize carbon dioxide emissions responsible
for climate change. The elements of the portfolio fall into
three main categories: products and solutions with outstanding
energy efficiency, such as combined cycle power plants,
energy-saving light bulbs and intelligent building technologies;
systems and components for renewable forms of energy, such as
wind turbines and solar power; and environmental technologies
for cleaner water and air.
The qualification of products and solutions for our
Environmental Portfolio is based on defined processes and strict
criteria. Once a year, the Siemens Sustainability Board decides
upon changes in the Environmental Portfolio. This covers the
inclusion of newly developed products and solutions fulfilling
our qualification criteria as well as additionally qualified
products and solutions for which proof for the fulfillment of
the qualification criteria was previously not available. For
additionally qualified products and solutions, we report their
prior-year revenue and prior-year contribution to reducing
customer carbon dioxide emissions on a comparable basis.
Furthermore, the Sustainability Board takes decisions regarding
the exclusion of products and solutions that no longer fulfill
our qualification criteria from the Environmental Portfolio. To
qualify for the Environmental Portfolio, a product or solution
must fall into one of the three categories mentioned above. The
calculation of the reduction of carbon dioxide emissions is
based on a specific comparison for every relevant product and
solution in the Environmental Portfolio. For this calculation,
we focus on those products and solutions that have a material
impact on the overall carbon dioxide emissions reduction. To
determine the baseline and calculate the reduction in our
customers annual carbon dioxide emissions, we generally
apply one of the following three methods: direct
before-and-after
comparison of the emissions; direct comparison with a reference
technology; or comparison with the installed base. The described
criteria and procedures are reviewed regularly and may be
subject to change.
With our Environmental Portfolio we intend to help our customers
to reduce their carbon dioxide footprint, cut their energy costs
and improve their profitability through an increase in their
productivity. Our target by 2011 is to
35
help our customers reduce their annual carbon dioxide emissions
by approximately 300 million tons through Siemens products
and solutions that were installed at customer locations since
the beginning of fiscal 2002 and remain in use today. The
Siemens products and solutions installed by the end of fiscal
2010 are already reducing customer carbon dioxide emissions by
approximately 267 million tons a year.
In addition to its environmental benefits, our Environmental
Portfolio enables us to compete successfully in attractive
markets and generate profitable growth. We had set ourselves a
revenue target for the Environmental Portfolio to
generate 25 billion in revenue from the portfolio by
the end of fiscal 2011. We achieved that goal significantly
earlier than planned. Including revenues from newly developed
and additionally qualified products and solutions, revenues from
the portfolio in the current year amounted to
27.6 billion and exceeded the comparable revenues of
26.8 billion in fiscal 2009. This means that in
fiscal 2010 our Environmental Portfolio already accounted for
about 36% of our total revenues. As we continue to see growth
opportunities for our Environmental Portfolio, we have set a new
target within One Siemens to exceed revenue of
40 billion from the portfolio by the end of fiscal
2014.
There is no standard system that applies across companies for
qualifying products and solutions for environmental and climate
protection, or for compiling and calculating the respective
revenues and the quantity of reduced carbon dioxide emissions
attributable to such products and solutions. Accordingly,
revenues from our Environmental Portfolio and the reduction of
our customers annual carbon dioxide emissions may not be
comparable with similar information reported by other companies.
Furthermore, we subject revenues from our Environmental
Portfolio and the reduction of our customers annual carbon
dioxide emissions to internal documentation and review
requirements which are different from those applicable to our
financial information. We may change our policies for
recognizing revenues from our Environmental Portfolio and the
reduction of our customers annual carbon dioxide emissions
in the future without previous notice.
As in previous years, we again commissioned an independent
accounting firm with a limited assurance engagement to review
the reported results for our Environmental Portfolio for fiscal
2010. Such review is different from the audit performed for our
consolidated financial statements. The outcome of the review was
favorable and the independent accounting firm reported its
results, in particular, the details relating to total revenues
generated by the Environmental Portfolio and the quantity of
reduced carbon dioxide emissions attributable to it, in an
Independent Assurance Report.
Property
Siemens has in excess of 300 major production and manufacturing
plants in more than 40 countries worldwide. A production and
manufacturing plant is defined as a facility at a business
level, in which raw or source materials are transformed into
finished goods on a large scale by using equipment and
production resources such as machines, tools, energy and labor.
More than 160 production and manufacturing plants are located in
the region Europe, C.I.S., Africa, Middle East; over 80
production and manufacturing plants are located in the Americas
and over 80 production and manufacturing plants are in Asia,
Australia. With more than 190 production and manufacturing
plants, the Industry Sector accounts for the greatest proportion
of these, followed by the Energy Sector (more than 100
facilities) and the Healthcare Sector (more than 30 facilities).
Siemens also owns or leases other properties including office
buildings, warehouses, research and development facilities and
sales offices.
Siemens principal executive offices are located in Munich,
Germany.
We believe that our current facilities are in good condition and
adequate to meet the requirements of our present and foreseeable
future operations.
None of our properties are subject to mortgages and other
security interests granted to secure indebtedness to financial
institutions.
36
Intellectual
property
Siemens has several thousand patents and licenses covering its
products and services worldwide. Research and development is a
priority throughout Siemens on a Sector, Cross-Sector Business
and Division basis. For a discussion of the main focus of the
current research and development efforts of each Sector, see
Research and development. Siemens also owns
thousands of registered trademarks worldwide. Neither the
Company nor any Sector or Cross-Sector Business or Division is
dependent on any single patent, license or trademark or any
group of related patents, licenses or trademarks.
Research
and development
In fiscal 2010, our research & development (R&D)
activities were targeted as before on (1) ensuring
long-term future viability, (2) enhancing technological
competitiveness and (3) optimizing the allocation of
R&D resources.
It is our aim to continue to strengthen our innovation
capability. In fiscal 2010, Siemens spent
3.846 billion on R&D. Despite the financial and
economic crisis, R&D intensity was level with fiscal 2009
and above the level in fiscal 2008.
The Industry Sector invested 1.7 billion with an
R&D intensity of 4.9%; the Energy Sector
0.8 billion with an R&D intensity of 3.1%; and
the Healthcare Sector 1.1 billion with an R&D
intensity of 9.0%. Our central research department (Corporate
Technology, CT) and Siemens IT Solutions and Services accounted
for additional R&D spending.
We have 12,800 R&D employees in Germany and 17,300 R&D
employees in roughly 30 countries outside of Germany, including
the U.S., China, Austria, India, Slovakia, Switzerland, UK,
Croatia, Sweden, Denmark, Czech Republic and France.
Siemens holds roughly 58,000 patents worldwide, compared to
56,000 patents a year earlier. In terms of the number of
published patent applications, Siemens ranked third in Germany
and second in Europe in calendar 2009. In terms of the number of
patents granted, Siemens ranked thirteenth in the U.S. in
calendar 2009. For comparison, Siemens was second in Germany and
in Europe, and twelfth in the U.S. in calendar 2008.
The focus of R&D for the Environmental Portfolio is on
increasing the efficiency of both renewable and conventional
power generation as well as further improving low-loss power
transmission, new solutions for intelligent power networks
(smart grids), solar energy, carbon dioxide separation in power
plants and energy storage systems for volatile renewable
energies. Further focus areas are to promote more efficient
energy use, whether for industry, building technology, lighting
(for example light emitting diodes) or transportation, including
electric vehiclesfrom drives to rapid charging
stationsas well as further development of water and air
purification systems and drinking water purification with new
membrane technologies.
37
Collaborations with universities and non-university research
institutes make an important contribution to Siemens
capacity to innovate. The key goals of these partnerships are
tapping the potential for joint research and development
projects, developing and extending the network of universities
or research institutes with which Siemens works and increasing
communication between Siemens and these universities or
institutes, and strengthening the appeal of Siemens to highly
qualified young people as a potential employer.
In addition, the Company takes part in publicly funded programs
sponsored by such organizations as the European Union, the
German Federal Ministry of Research and Education, the German
Federal Ministry of Economics and Technology, and the German
Federal Ministry of the Environment, Nature Conservation and
Nuclear Safety. Siemens believes that these activities not only
promote an exchange with external partners in the area of
innovation, but also provide access to complementary
technological competence that enhances the innovative strength
of the entire Company.
CT works closely with the R&D teams of the Sectors and
Divisions. To facilitate this collaboration CT, which has more
than 5,000 employees, is set up as a worldwide network with
primary locations in Germany, the U.S., Austria, Slovakia,
Russia, India, China, Japan, and Singapore.
The Sectors concentrate their R&D efforts on the next
generation of their products and solutions, which they are
preparing for a successful market launch. In contrast, the
research and development specialists at CT are focused two
generations ahead and prepare the technological basis for that
generation. Due to their close collaboration with the product
and customer-related parts of the Company as well as their
intensive interchange with global research establishments, the
CT specialists are not only able to identify technical and
societal trends at an early stage, but also to analyze and
actively shape these trends. CT is dedicated to the principles
of Open Innovation and accordingly, continuously strives to
ensure that information from the science and technology sectors
is introduced at Siemens.
The roughly 50 global technology fields covered by CT include
the subject areas materials and microsystems, production
methods, security, software and engineering, power engineering,
sensors, automation, medical information systems and imaging
methods, information and communication technologies, the
extraction and processing of raw materials, and off-grid power
generation. The technology portfolio also includes lighthouse
projects which are designed to create new business opportunities
for Siemens. They cover areas such as electromobility and smart
gridfor example, solutions for major strategic challenges.
The combination of the latest technologies and intensive
cooperation with the Sectors has the potential to produce
entirely new solutions. Our SMART (Simplicity, Maintenance
friendly, Affordable, Reliable and Timely to market) solutions
implement new technologies in a manner that renders them
competitive in low-price markets. These affordable solutions are
aligned with the needs of the relevant markets and are
characterized by their simplicity, ease of maintenance, and
reliability. SMART solutions, such as those developed in the
fields of healthcare and decentralized power generation, are
under development at CT and at the Sectors. In fact, a number of
them are already being used successfully today.
R&D priorities of the Industry Sector include the
IT-based integration of product planning and production
processes into product lifecycle management. The objective is to
accelerate processes at each point of the value-added chain with
the aim of reducing the time to market by as much as 50%. The
further development of automation technology, including, in
particular software, is of crucial importance in this respect.
In addition, the Industry Sector is striving to achieve greater
energy efficiency, lower consumption of raw materials, and lower
emissions. The same goals are pursued in connection with the
development of high-performance lighting solutionsfor
example with light-emitting diodesbuilding control systems
or transportation systems featuring energy-saving drives and of
our complete mobility approach which aims to
integrate various transportation systems in order to bring
people and goods to their destination more efficiently, more
rapidly, and more comfortably.
Our R&D activities in the Energy Sector are focused
on developing methods for the efficient generation,
transmission, and distribution of electrical energy. In this
regard, the conversion of existing power grids to smart grids,
in particular, is expected to play a major role. Intelligent
grids are not only the prerequisite for sustainable energy
systems but also for achieving an optimal integration of
increasingly large amounts of renewable energies and future
electric vehicles into the energy mix. Another area of research
addressed by the Energy Sector involves optimized solutions for
solar thermal power plants. Other focal points include floating
wind power turbines on high seas, innovative technologies for
the low-loss transmission of electricity, the use of new
materials for turbine blades
38
to enhance power plant efficiency, and technologies for
separating carbon dioxidea greenhouse gasfrom the
fuel gas produced at fossil fuel-fired power plants.
The reversal of the age pyramid, together with growing
population figures, is leading to increasing demand for
efficient healthcare, which offers people the best possible care
at an affordable price. Accordingly, the R&D activities of
the Healthcare Sector focus particularly on innovations
that assist customers in meeting this challenge. This primarily
involves the combination of various imaging methodswhich
provide increasingly detailed and faster three-dimensional
insights into the body of a patient, while subjecting him or her
to less discomfortwith modern therapeutic measures,
diagnostics, and information technology to create vastly
improved, coordinated workflows. In response to market demands,
product innovations that automate clinical work processes and
optimize laboratory diagnostics are also a priority for the
Healthcare Sector. As a result of the information provided by
the various diagnostic methods, doctors are in a position to
better identify diseases earlier. They are also able to tailor
therapies more closely to a patients needs by monitoring
the effect of medication more accurately and exploiting the
evaluation and analytical capabilities of modern computer
technology. The Sector is also involved in the targeted
development of products that meet the specific requirements of
healthcare systems of emerging countries, which enables us to
assist in developing primary medical care in these countries.
Supply
chain management
In fiscal 2009, we had launched a Supply Chain Management
Initiative with the objective of working with our suppliers to
establish a leading global procurement network, promote the
development of technologies, and accelerate innovation cycles.
In fiscal 2010, this initiative was transferred into a new and
permanent organization for supply chain management within
Siemens, having already generated substantial and sustainable
savings for Siemens. Supply chain management at Siemens aims to
ensure the availability and quality of the materials we require
to serve our customers. This can only be achieved by means of a
globally balanced, localized and close-knit network with our
supply base and a very close link and strategic alignment with
the Siemens businesses.
A cornerstone of our new organization for supply chain
management is the global and centralized responsibility for all
indirect materials, as well as all Siemens-wide managed direct
materials. This approach constitutes a major step towards one of
the key objectives of the former initiative, to significantly
increase the share of Siemens-wide managed materials, in order
to leverage bundling effects across Siemens more effectively.
The second central component of our Supply Chain Management
Initiative was global value sourcing, which entails the
development of a competitive global supply network and joint
product development and innovations with our key suppliers as
well as an increased share of sourcing in developing markets
(global value sourcing countries), in order to achieve a better
regional balance between sales and procurement volume. The final
measure within our initiative was to optimize our supply base by
reducing the number of our suppliers and to intensify our
cooperation with those suppliers that contribute most to our
value creation.
Another important topic for supply chain management at Siemens
is sustainability in our supply chain. We made further progress
with this topic in the current fiscal year and will continue to
pursue it in fiscal 2011. Siemens requires all its suppliers to
comply with the principles of the Code of Conduct for Siemens
Suppliers and to support its implementation in their own supply
chains as well. We also initiate worldwide
on-site
sustainability audits by external experts to ensure the
fulfillment of our standards and to encourage a sustainable
business conduct throughout our entire global supply chain.
Further, we are striving to optimize the continuous feedback
from our suppliers by taking a new approach to feedbacks. In
particular, we want to find out from our suppliers how Siemens
can better support and integrate them in implementing
sustainability topics.
In addition, we have designed an Energy Efficiency Program for
our suppliers. By conducting environmental and energy efficiency
checks, we work with our suppliers to identify any potential for
reducing the consumption of energy and resources. In this
regard, we draw upon the expertise and know-how gained in
connection with our own environmental program and our
Environmental Portfolio. For further information, see
Environmental Portfolio. We are planning to roll out
this program to the first 1,000 suppliers over the next two
fiscal years.
39
Legal
proceedings
Public
corruption proceedings
Governmental
and related proceedings
Public prosecutors and other government authorities in
jurisdictions around the world are conducting investigations of
Siemens and certain of our current and former employees
regarding allegations of public corruption, including criminal
breaches of fiduciary duty such as embezzlement, as well as
bribery, money laundering and tax evasion, among others. These
investigations involve allegations of corruption at a number of
Siemens business units.
On December 15, 2008, Siemens announced that legal
proceedings against it arising from allegations of bribing
public officials were concluded on the same day in Munich,
Germany, and in Washington, DC. The Munich public prosecutor
announced the termination of legal proceedings alleging the
failure of the former Managing Board of Siemens AG to fulfill
its supervisory duties. The investigations of former members of
the Managing Board, employees of the Company and other
individuals remain unaffected by this resolution. In Washington,
DC, Siemens pleaded guilty in federal court to criminal charges
of knowingly circumventing and failing to maintain adequate
internal controls and failing to comply with the books and
records provisions of the U.S. Foreign Corrupt Practices
Act (FCPA). In related cases, three Siemens foreign
subsidiaries, Siemens S.A. (Argentina), Siemens Bangladesh Ltd.
and Siemens S.A. (Venezuela), pleaded guilty to individual
counts of conspiracy to violate the FCPA. At the same time,
Siemens settled a civil action against it brought by the
U.S. Securities and Exchange Commission (SEC) for
violations of the FCPA. The agreement reflects the
U.S. prosecutors express recognition of Siemens
extraordinary cooperation as well as Siemens new and
comprehensive compliance program and extensive remediation
efforts. Based on these facts, the lead agency for
U.S. federal government contracts, the Defense Logistics
Agency, issued a formal determination that Siemens remains a
responsible contractor for U.S. government business.
Under the terms of the plea and settlement agreements reached in
the United States, Siemens has engaged Dr. Theo Waigel,
former German federal minister of finance, as compliance monitor
to evaluate and report, for a period of up to four years, on the
Companys progress in implementing and operating its new
compliance program.
In the fourth quarter of fiscal 2008, the Company accrued a
provision in the amount of approximately 1 billion in
connection with the discussions with the Munich public
prosecutor, the SEC and the United States Department of Justice
for the purpose of resolving their respective investigations.
Cash outflows relating to the fines and disgorgements referred
to above during the first quarter of fiscal 2009 amounted to
1.008 billion.
As previously reported, in October 2007, the Munich public
prosecutor terminated a similar investigation relating to
Siemens former Communications Group. Siemens paid
201 million in connection with the termination of
this investigation. This brings the total amount paid to
authorities in Germany in connection with these legal
proceedings to 596 million.
As previously reported, the public prosecutor in Wuppertal,
Germany, is conducting an investigation against Siemens
employees regarding allegations that they participated in
bribery related to the awarding of an EU contract for the
refurbishment of a power plant in Serbia in 2002. In April 2010,
the public prosecutor discontinued the investigation.
As previously reported, Siemens Zrt. Hungary and certain of its
employees are being investigated by Hungarian authorities in
connection with allegations concerning suspicious payments in
connection with consulting agreements with a variety of shell
corporations and bribery relating to the awarding of a contract
for the delivery of communication equipment to the Hungarian
Armed Forces.
As previously reported, the Vienna, Austria, public prosecutor
is conducting an investigation into payments between 1999 and
2006 relating to Siemens AG Austria and its subsidiary Siemens
VAI Metal Technologies GmbH & Co. for which valid
consideration could not be identified.
40
As previously reported, authorities in Russia are conducting an
investigation into alleged misappropriation of public funds in
connection with the award of contracts to Siemens for the
delivery of medical equipment to public authorities in
Yekaterinburg in the years 2003 to 2005. Siemens is cooperating
with the authorities.
As previously reported, in August 2007, the Nuremberg-Fuerth
public prosecutor began an investigation into possible
violations of law in connection with the United Nations
Oil-for-Food
Programme. In December 2008, the public prosecutor discontinued
the investigation with respect to all persons accused.
As previously reported, the Sao Paulo, Brazil, public prosecutor
conducted certain investigations of Siemens relating to the use
of business consultants and suspicious payments in connection
with the former Transportation Systems Group in or after 2000.
In 2009, the authority discontinued the investigation.
On March 9, 2009, Siemens AG received a decision by the
Vendor Review Committee of the United Nations Secretariat
Procurement Division (UNPD) suspending Siemens AG from the UNPD
vendor database for a minimum period of six months. The
suspension applies to contracts with the UN Secretariat and
stems from Siemens AGs guilty plea in December 2008 to
violations of the U.S. Foreign Corrupt Practices Act.
Siemens AG does not expect a significant impact on its business,
results of operations or financial condition from this decision.
On December 22, 2009, Siemens AG filed a request to lift
the existing suspension to which it has not yet received a
response.
In April 2009, Siemens AG received a Notice of
Commencement of Administrative Proceedings and Recommendations
of the Evaluation and Suspension Officer from the World
Bank, which comprises the International Bank for Reconstruction
and Development as well as the International Development
Association, in connection with allegations of sanctionable
practices during the period
2004-2006
relating to a World Bank-financed project in Russia. On
July 2, 2009, the Company entered into a global settlement
agreement with the International Bank for Reconstruction and
Development, the International Development Association, the
International Finance Corporation and the Multilateral
Investment Guarantee Agency (collectively, the World Bank Group)
to resolve World Bank Group investigations involving allegations
of corruption by Siemens. In the agreement, Siemens voluntarily
undertakes to refrain from bidding in connection with any
project, program, or other investment financed or guaranteed by
the World Bank Group (Bank Group Projects) for a period of two
years, commencing on January 1, 2009 and ending on
December 31, 2010. Siemens is not prohibited by the
voluntary restraint from continuing work on existing contracts
under Bank Group Projects or concluded in connection with World
Bank Group corporate procurement provided such contracts were
signed by Siemens and all other parties thereto prior to
January 1, 2009. The agreement provides for exemptions to
the voluntary restraint in exceptional circumstances upon
approval of the World Bank Group. Siemens also had to withdraw
all pending bids, including proposals for consulting contracts,
in connection with Bank Group Projects and World Bank Group
corporate procurement where the World Bank Group has not
provided its approval prior to July 2, 2009. Furthermore,
Siemens is also required to voluntarily disclose to the World
Bank Group any potential misconduct in connection with any Bank
Group Projects. Finally, Siemens has undertaken to pay
U.S.$100 million to agreed anti-corruption organizations
over a period of not more than 15 years. In fiscal 2009,
the Company took a charge to Other operating expense to accrue a
provision in the amount of 53 million relating to the
global settlement agreement with the World Bank Group. In
November 2009, Siemens Russia OOO and all its controlled
subsidiaries were, in a separate proceeding before the World
Bank Group, debarred for four years from participating in Bank
Group Projects. Siemens Russia OOO did not contest the debarment.
As previously reported, the Norwegian anti-corruption unit,
Oekokrim, conducted an investigation against Siemens AS Norway
and two of its former employees related to payments made for
golf trips in 2003 and 2004, which were attended by members of
the Norwegian Department of Defense. On July 3, 2009, the
trial court in Oslo, Norway, found the two former employees not
guilty. Oekokrim stated on July 16, 2009, that the
proceedings against Siemens AS Norway have also been
discontinued.
In November 2009 and in February 2010, a subsidiary of Siemens
AG voluntarily self-reported possible violations of South
African anti-corruption regulations in the period before 2007 to
the responsible South African authorities.
41
As previously reported, the public prosecutor in Milan, Italy,
had filed charges against a current and a former employee of
Siemens S.p.A., Siemens S.p.A., and one of its subsidiaries in
November 2007, alleging that the two individuals made illegal
payments to employees of the state-owned gas and power group
ENI. Charges were also filed against other individuals and
companies not affiliated with Siemens. The two individuals,
Siemens S.p.A., and its subsidiary entered into a
patteggiamento (plea bargaining agreement
without the recognition of any guilt or responsibility) with the
Milan public prosecutor which was confirmed by the Milan court
on April 27, 2009. Under the terms of the patteggiamento,
Siemens S.p.A. and the subsidiary were each fined 40,000
and ordered to disgorge profits in the amount of 315,562
and 502,370, respectively. The individuals accepted
suspended prison sentences. The decision is final and the
proceedings are closed.
As previously reported, the Argentinean Anti-Corruption
Authority is conducting an investigation into corruption of
government officials in connection with the award of a contract
to Siemens in 1998 for the development and operation of a system
for the production of identity cards, border control, collection
of data and voters registers. Searches were undertaken at
the premises of Siemens Argentina and Siemens IT Services S.A.
in Buenos Aires in August 2008 and in February 2009. The Company
is cooperating with the Argentinean Authorities. The Argentinean
investigative judge also requested judicial assistance from the
Munich public prosecutor and the federal court in New York
repeatedly.
On August 17, 2009, the Anti-Corruption Commission of
Bangladesh (ACC) filed criminal charges against two current and
one former employee of Siemens Bangladeshs Healthcare
business. It is alleged that the employees colluded with
employees of a public hospital to overcharge for the delivery of
medical equipment in the period before 2007.
On December 30, 2009, the ACC sent a request for
information to Siemens Bangladesh Ltd. (Siemens Bangladesh)
related to telecommunications projects of Siemens former
Communications (Com) Group undertaken prior to 2007. On
January 4, 2010, Siemens Bangladesh was informed that in a
related move the Anti Money Laundering Department of the Central
Bank of Bangladesh is conducting a special investigation into
certain accounts of Siemens Bangladesh and of former employees
of Siemens Bangladesh in connection with transactions for Com
projects undertaken in the period from 2002 to 2006. On
February 16, 2010, the ACC sent a request for additional
information.
On June 23, 2010, the Frankfurt public prosecutor searched
premises of Siemens in Germany in response to allegations of
questionable payments relating to an Industry project in
Thailand. Siemens is cooperating with the authority.
In August 2010, the
Inter-American
Development Bank (IADB) issued a notice of administrative
proceedings against, among others, Siemens IT Solutions and
Services Argentina alleging fraudulent misstatements and
antitrust violations in connection with a public invitation to
tender for a project in the province of Cordoba, Argentina, in
2003. Siemens is cooperating with the IADB.
Also in August 2010, the IADB issued a notice of administrative
proceedings against, among others, Siemens Venezuela alleging
fraudulent misstatements and public corruption in connection
with a public invitation to tender for healthcare projects in
the Venezuelan provinces of Anzoategui and Merida in 2003.
Siemens is cooperating with the IADB.
As previously reported, in February 2010 a Greek Parliamentary
Investigation Committee (GPIC) was established to investigate
whether any politicians or other state officials in Greece were
involved in alleged wrong-doing of Siemens in Greece.
GPICs investigation is focused on possible criminal
liability of politicians and other state officials. Greek public
prosecutors are separately investigating certain fraud and
bribery allegations involvingamong othersformer
board members and former executives of Siemens A.E. Greece
(Siemens A.E.) and Siemens AG. Both investigations may have
a negative impact on civil proceedings currently pending against
Siemens AG and Siemens A.E. and may affect the future business
activities of Siemens in Greece. In September 2010, the GPIC
assumed in a preliminary estimate that the alleged damages
suffered by the Greek state from contracts signed with Siemens
might reach up to 2 billion. At present, it is
unclear to Siemens what the basis of the alleged damages is or
how the alleged amount of damages was computed.
42
As previously reported, the Nigerian Economic and Financial
Crimes Commission (EFCC) was conducting an investigation into
alleged illegal payments by Siemens to Nigerian public officials
between 2002 and 2005. In October 2010, the EFCC filed charges
with the Federal High Court in Abuja and the High Court of the
Federal Capital Territory againstamong othersSiemens
Ltd. Nigeria (Siemens Nigeria), Siemens AG and former board
members of Siemens Nigeria. On November 22, 2010, the
Nigerian Government and Siemens Nigeria entered into an out of
court settlement, obligating Siemens Nigeria to make a payment
in the mid double-digit Euro million range to Nigeria in
exchange for the Nigerian Government withdrawing these criminal
charges and refraining from the initiation of any criminal,
civil or other actionssuch as a debarmentagainst
Siemens Nigeria, Siemens AG, and Siemens employees.
The Company remains subject to corruption-related investigations
in several jurisdictions around the world. As a result,
additional criminal or civil sanctions could be brought against
the Company itself or against certain of its employees in
connection with possible violations of law. In addition, the
scope of pending investigations may be expanded and new
investigations commenced in connection with allegations of
bribery and other illegal acts. The Companys operating
activities, financial results and reputation may also be
negatively affected, particularly as a result of penalties,
fines, disgorgements, compensatory damages, third-party
litigation, including with competitors, the formal or informal
exclusion from public invitations to tender, or the loss of
business licenses or permits. Additional expenses and
provisions, which could be material, may need to be recorded in
the future for penalties, fines, damages or other charges in
connection with the investigations.
As previously reported, the Company is following up on evidence
of bank accounts and the amounts of the funds deposited therein
in various locations. Certain funds have been frozen by
authorities. During fiscal 2010, the Company recognized an
amount of 40 million in Other operating income
from the agreed recovery of funds from one of these accounts.
Civil
litigation
As already disclosed by the Company in press releases, Siemens
AG asserted claims for damages against former members of the
Managing and Supervisory Board. The Company based its claims on
breaches of organizational and supervisory duties in view of the
accusations of illegal business practices that occurred in the
course of international business transactions in the years 2003
to 2006 and the resulting financial burdens for the Company. On
December 2, 2009 Siemens reached a settlement with nine out
of eleven former members of the Managing and Supervisory Board.
As required by law, the settlements between the Company and
individual board members were subject to approval by the Annual
Shareholders Meeting. The Company reached a settlement
agreement with its directors and officers (D&O) insurers
regarding claims in connection with the D&O insurance of up
to 100 million. The Annual Shareholders Meeting
approved all nine settlements between the Company and the former
members of the Managing and Supervisory Board on
January 26, 2010. The shareholders also agreed to the
settlement with respect to claims under the D&O insurance.
During the second quarter of fiscal 2010, Siemens AG received
certain benefits as required under the aforementioned settlement
agreements with the result that an amount of
96 million net of related cost was recognized
primarily in Other operating income. Thereof
84 million resulted from the settlement agreement
with the D&O insurers and 12 million resulted
from settlement agreements with former board members. The former
board members used claims they had against the Company to offset
a portion of their obligations under the aforementioned
settlement agreements. The remaining amount was or will be
settled by the former board members in cash. On January 25,
2010, Siemens AG filed a lawsuit with the Munich District Court
I against the two former board members who were not willing to
settle, Thomas Ganswindt and Heinz-Joachim Neubürger. The
complaint was served upon the defendants. The defendants asked
Siemens AG to produce certain documents.
As previously reported, an alleged holder of Siemens American
Depositary Shares filed a derivative lawsuit in February 2007
with the Supreme Court of the State of New York against certain
current and former members of Siemens Managing and
Supervisory Boards as well as against Siemens as a nominal
defendant, seeking various forms of relief relating to the
allegations of corruption and related violations at Siemens. The
alleged holder of Siemens American Depository Shares voluntarily
withdrew the derivative action in September 2009.
43
As previously disclosed, in June 2008, the Republic of Iraq
filed an action requesting unspecified damages against 93 named
defendants with the United States District Court for the
Southern District of New York on the basis of findings made in
the Report of the Independent Inquiry Committee into the
United Nations
Oil-for-Food
Programme. Siemens S.A.S. France, Siemens A. Ş.
Turkey and OSRAM Middle East FZE, Dubai, are among the 93 named
defendants. Process was served upon all three Siemens
subsidiaries. The three Siemens subsidiaries will defend
themselves against the action.
As previously reported, Siemens AG had filed a request for
arbitration against the Republic of Argentina (Argentina) with
the International Center for Settlement of Investment Disputes
(ICSID) of the World Bank. Siemens AG claimed that Argentina had
unlawfully terminated its contract with Siemens for the
development and operation of a system for the production of
identity cards, border control, collection of data and
voters registers (DNI project) and thereby violated the
Bilateral Investment Protection Treaty between Argentina and
Germany (BIT). Siemens AG sought damages for expropriation and
violation of the BIT of approximately U.S.$500 million. A
unanimous decision on the merits was rendered by the ICSID
arbitration tribunal on February 6, 2007, awarding Siemens
AG compensation in the amount of U.S.$217.8 million, plus
compound interest thereon at a rate of 2.66% since May 18,
2001. The tribunal also ruled that Argentina is obligated to
indemnify Siemens AG against any claims of subcontractors in
relation to the project (amounting to approximately
U.S.$44 million) and, furthermore, that Argentina would be
obligated to pay Siemens AG the full amount of the contract
performance bond (U.S.$20 million) in the event this bond
was not returned. The time period set by the tribunal for
returning the contract performance bond subsequently elapsed
without delivery. As previously reported, Argentina subsequently
filed applications with the ICSID aiming at the annulment and
reversal of the decision and a stay of enforcement of the
arbitral award. On August 12, 2009, Argentina and Siemens
AG reached an agreement to mutually settle the case and
discontinue any and all civil proceedings in connection with the
case without acknowledging any legal obligations or claims. No
payment was made by either party.
As previously reported, Siemens has been approached by a
competitor to discuss claims it believes it has against the
Company. The alleged claims relate to allegedly improper
payments by the Company in connection with the procurement of
public and private contracts. Siemens is assessing whether any
basis exists for such claims. Siemens and the competitor have
engaged in discussions; the outcome of these discussions is open.
As previously disclosed, a securities class action was filed in
December 2009 against Siemens AG with the United States District
Court for the Eastern District of New York seeking damages for
alleged violations of U.S. securities laws. The Company is
defending itself against the action.
Antitrust
proceedings
As previously reported, in June 2007, the Turkish Antitrust
Agency confirmed its earlier decision to impose a fine in an
amount equivalent to 6 million on Siemens A.S. Turkey
based on alleged antitrust violations in the traffic lights
market. Siemens A.S. Turkey has appealed this decision and this
appeal is still pending.
As previously reported, in February 2007, the Norwegian
Competition Authority launched an investigation into possible
antitrust violations involving Norwegian companies active in the
field of fire security, including Siemens Building Technologies
AS. In December 2008, the Norwegian Competition Authority issued
a final decision that Siemens Building Technologies AS had not
violated antitrust regulations.
As previously reported, in February 2007, the European
Commission launched an investigation into possible antitrust
violations involving European producers of power transformers,
including Siemens AG and VA Technologie AG (VA Tech), which
Siemens acquired in July 2005. The German Antitrust Authority
(Bundeskartellamt) has become involved in the proceeding
and is responsible for investigating those allegations that
relate to the German market. Power transformers are electrical
equipment used as major components in electric transmission
systems in order to adapt voltages. The Company is cooperating
in the ongoing investigation with the European Commission and
the German Antitrust Authority. On October 7, 2009, the
European Commission imposed fines totaling
67.644 million on seven companies with regard to a
territorial market sharing agreement related to Japan and
Europe. Siemens was not fined because it had voluntarily
disclosed this aspect of the case to the authorities. The German
Antitrust Authority continues its investigation with regard to
the German market.
44
As previously reported, in April 2007, Siemens AG and VA Tech
filed actions before the European Court of First Instance in
Luxemburg against the decisions of the European Commission dated
January 24, 2007, to fine Siemens and VA Tech for alleged
antitrust violations in the European Market of high-voltage
gas-insulated switchgear between 1988 and 2004. Gas-insulated
switchgear is electrical equipment used as a major component for
turnkey power substations. The fine imposed on Siemens amounted
to 396.6 million and was paid by the Company in 2007.
The fine imposed on VA Tech, which Siemens AG acquired in July
2005, amounted to 22.1 million. VA Tech was declared
jointly liable with Schneider Electric for a separate fine of
4.5 million. The European Court of First Instance has
not yet issued a decision. In addition to the proceedings
mentioned in this document, authorities in Brazil, the Czech
Republic and Slovakia are conducting investigations into
comparable possible antitrust violations. In October 2010, the
High Court of New Zealand dismissed corresponding charges
against Siemens. The decision is still appealable.
As previously reported, on October 25, 2007, upon the
Companys appeal, a Hungarian competition court reduced
administrative fines imposed on Siemens AG for alleged antitrust
violations in the market of high-voltage gas-insulated
switchgear from 0.320 million to
0.120 million and from 0.640 million to
0.110 million regarding VA Technologie AG. The
Company and the Competition Authority both appealed the
decision. In November 2008, the Court of Appeal confirmed the
reduction of the fines. On December 5, 2008, the
Competition Authority filed an extraordinary appeal with the
Supreme Court. In December 2009, Siemens AG was notified that
the Supreme Court had remanded the case to the Court of Appeal,
with instructions to take a new decision on the amount of the
fines. The extraordinary appeal from the Competition Authority
was rejected with legally binding effect by the Court of Appeal
on January 27, 2010. On April 6, 2010, the Competition
Authority filed another extraordinary appeal with the Supreme
Court.
In connection with the January 24, 2007 decision of the
European Commission regarding alleged antitrust violations in
the high-voltage gas-insulated switchgear market, claims are
being made against Siemens. Among others, a claim was filed by
National Grid Electricity Transmission Plc. (National Grid) with
the High Court of England and Wales in November 2008. Twenty-one
companies have been named as defendants, including Siemens AG
and various of its subsidiaries. National Grid asserts claims in
the aggregate amount of approximately £249 million for
damages and compound interest. Siemens believes National
Grids claim to be without merit. As discussed, the
European Commissions decision has been appealed to the
European Court of First Instance. On June 12, 2009, the
High Court granted a stay of the proceedings pending before it
until three months after the outcome of the appeal to the
European Court of First Instance and any subsequent appeals to
the European Court of Justice. On June 26, 2009, the
Siemens defendants filed their answers to the complaint and
requested National Grids claim to be rejected. Discovery
is ongoing.
As previously reported, the South African Competition Commission
investigated alleged antitrust violations in the market of
high-voltage gas-isolated switchgear. In May 2009, the Company
was notified that the Competition Commission will not pursue the
prosecution of this matter.
As previously reported, a suit and motion for approval of a
class action was filed in Israel in December 2007 to commence a
class action based on the fines imposed by the European
Commission for alleged antitrust violations in the high-voltage
gas-insulated switchgear market. Thirteen companies were named
as defendants in the suit and motion, among them Siemens AG
Germany, Siemens AG Austria and Siemens Israel Ltd. The class
action alleged damages to electricity consumers in Israel in the
amount of approximately 575 million related to higher
electricity prices claimed to have been paid because of the
alleged antitrust violations. At a hearing on December 11,
2008, the plaintiff requested to withdraw from the action and
from the motion to certify the action as a class action. The
court approved the request and dismissed the action and the
motion to certify.
In January 2010, the European Commission launched an
investigation related to previously reported investigations into
potential antitrust violations involving producers of flexible
current transmission systems in New Zealand and the USA
including, among others, Siemens AG. In April 2010, authorities
in Korea and Mexico informed the Company that similar
proceedings had been initiated. Siemens AG is cooperating with
the authorities. On June 1, 2010, the New Zealand Commerce
Commission notified Siemens AG that their investigation had been
closed. On September 13, 2010, the European Commission
notified Siemens AG that their investigation had been
45
closed. On November 17, 2010, the Korean antitrust
authority notified Siemens AG that their investigation had been
closed.
On February 11, 2010, the Italian Antitrust Authority
searched the premises of several healthcare companies, including
Siemens Healthcare Diagnostics S.r.l. and Siemens S.p.A., in
response to allegations of anti-competitive agreements relating
to a 2009 public tender process for the supply of medical
equipment to the procurement entity for the public healthcare
sector in the Italian region of Campania, So.Re.Sa. Siemens is
cooperating with the authority.
Other
proceedings
As previously reported, starting in December 2006, the Company
and Qisda Corp. (formerly named BenQ Corp.), a Taiwanese
company, were parties in an arbitration proceeding before the
International Chamber of Commerce (ICC) relating to the
purchase by Qisda of the Companys mobile devices business
in 2005. The parties subsequently resolved their disputes and,
upon joint request of the parties, the ICC issued an Award by
Consent in March 2009.
On November 25, 2008, Siemens AG and the insolvency
administration of BenQ Mobile GmbH & Co. OHG announced
that they had reached a settlement after constructive
discussions that began in 2006. In the settlement agreement,
Siemens AG agreed to a gross payment of 300 million,
which was made in December 2008. However, ultimately, the
settlement is expected to result in a total net payment of
approximately 255 million after taking into account
the claims against the debtors estate, which were filed by
Siemens AG and acknowledged by the insolvency administrator.
Since Siemens AG had made sufficient provisions for the expected
settlement, the settlement did not have a material negative
impact on Siemens AGs results of operations for fiscal
2009.
As previously reported, Siemens AG is a member of a supplier
consortium that has contracted to construct the nuclear power
plant Olkiluoto 3 in Finland for Teollisuuden Voima
Oyj (TVO) on a turnkey basis. Siemens AGs share of the
consideration to be paid to the supplier consortium under the
contract is approximately 27%. The other member of the supplier
consortium is a further consortium consisting of Areva NP S.A.S.
and its wholly-owned subsidiary, Areva NP GmbH. The agreed
completion date for the nuclear power plant was April 30,
2009. Completion of the power plant has been delayed for reasons
which are in dispute. In December 2008, the supplier consortium
filed a request for arbitration against TVO demanding an
extension of the construction time, additional compensation and
damages in the amount of now approximately
1.23 billion. TVO rejected the demand for an
extension of time and made counterclaims against the supplier
consortium. These consist primarily of damages due to the delay,
claimed to amount to approximately 1.43 billion based
on estimated completion of the plant in June 2012 with a delay
of 38 months. Assuming the full cooperation of all parties
involved, nuclear fuel is expected to be loaded into the reactor
at the end of 2012 commencing the commissioning phase of the
overall plant. This testing phase will last several months. As
of today, completion is expected to occur by the end of the 2013
calendar year.
In early 2009 Siemens AG terminated its joint venture with Areva
S.A. (Areva). Thereafter Siemens AG entered into negotiations
with the State Atomic Energy Corporation Rosatom (Rosatom) with
a view to forming a new partnership active in the construction
of nuclear power plants, in which it would be a minority
shareholder. In April 2009, Areva filed a request for
arbitration with the ICC against Siemens AG. Areva seeks an
order enjoining Siemens AG from pursuing such negotiations with
Rosatom, a declaration that Siemens AG is in material breach of
its contractual obligations, a reduction of the price payable to
Siemens AG for its stake in the Areva NP S.A.S. joint venture
and damages in an amount to be ascertained. Siemens AG filed its
answer in June 2009, primarily seeking a dismissal of
Arevas claims and a price increase. The arbitral tribunal
has been constituted and the main proceedings have commenced. On
November 17, 2009, the arbitral tribunal issued an interim
order which imposes certain provisional restrictions on Siemens
AG with respect to the negotiation process and the planned
partnership with Rosatom; the order does not preclude Siemens AG
from continuing its discussions with Rosatom during the
arbitration. In its last submissions Areva did not uphold its
request for damages. In September 2010 the hearing on the merits
was held. The outcome of the main proceedings remains open.
As previously reported, a Mexican governmental control authority
had barred Siemens S.A. de C.V. Mexico (Siemens Mexico) from
bidding on public contracts for a period of three years and nine
months beginning
46
November 30, 2005. This proceeding arose from allegations
that Siemens Mexico did not disclose alleged minor tax
discrepancies when it was signing a public contract in 2002.
Upon several appeals by Siemens Mexico, the execution of the
debarment was stayed, the debarment subsequently reduced to a
period of four months, and in June 2009 the Company was finally
informed by the relevant administrative court that the debarment
was completely annulled.
In July 2008, Mr. Abolfath Mahvi filed a request for
arbitration with the ICC seeking an award of damages against
Siemens AG in the amount of DM150 million (or the
equivalent in euro, which is approximately
77 million) plus interest. Mr. Mahvis
claim is based on a contract concluded in 1974 between a company
that was then a subsidiary of Siemens and two other companies,
one domiciled in the Bermudas and the other in Liberia.
Mr. Mahvi alleged that he is the successor in interest to
the Bermudan and Liberian companies and that the companies
assisted Siemens AG in the acquisition of a power plant project
in Bushehr, Iran. On August 24, 2010, the arbitration award
was served upon Siemens AG. All claims of Mr. Mahvi were
rejected. The plaintiff must bear the costs of the arbitration
proceeding.
In July 2008, Hellenic Telecommunications Organization
Société Anonyme (OTE) filed a lawsuit against Siemens
AG with the district court of Munich, Germany, seeking to compel
Siemens AG to disclose the outcome of its internal
investigations with respect to OTE. OTE seeks to obtain
information with respect to allegations of undue influence
and/or acts
of bribery in connection with contracts concluded between
Siemens AG and OTE from 1992 to 2006. In May 2009, OTE was
granted access to the public prosecutors files in Greece.
At the end of July 2010, OTE expanded its claim and requested
payment of damages by Siemens AG of at least
57.07 million to OTE for alleged bribery payments to
OTE-employees. Siemens AG is currently preparing its written
statement of defense relating to the expansion of the claim. The
oral hearing has been scheduled for February 2011.
Siemens A.E. entered into a subcontract agreement with Science
Applications International Corporation, Delaware, USA, (SAIC) in
May of 2003 to deliver and install a significant portion of a
security surveillance system (the C4I project) in advance of the
Olympic Games in Athens, Greece. Siemens A.E. fulfilled its
obligations pursuant to the subcontract agreement. Nonetheless,
the Greek government claimed errors related to the
C4I-system
and withheld amounts for abatement in the double-digit million
euro range. Furthermore the Greek government withheld final
payment in the double-digit million euro range, only recently
claiming that the system has not been finally accepted. Although
Siemens A.E. is not a contractual party of the Greek government,
under Siemens A.Es subcontract agreement with SAIC
non-payment by the Greek government economically affects Siemens
A.E. as well. SAIC has filed for arbitration contesting all the
Greek governments claims and ability to withhold payments.
The Greek State filed inter alia a motion to stay the
arbitration pursuant to the ongoing criminal investigations
conducted by the Greek public prosecutor. Resolution of this
dispute has been complicated by bribery and fraud allegations
against Siemens A.E. in Greece, which have resulted in extensive
negative media coverage concerning the C4I-system.
The Greek tax authorities have audited Siemens A.E.s books
for the 1997 to 2003 and 2004 to 2007 tax years. In the third
quarter of fiscal 2010, based on a preliminary communication of
the findings of the tax audits, Siemens A.E. made payments under
a tax law enacted in April 2010 to settle certain matters for
which provisions had been established. Siemens A.E. does not
expect any further material findings by the Greek tax
authorities which would require Siemens A.E. to make additional
material payments.
In December 2008, the Polish Agency of Internal Security (AWB)
remanded into custody an employee of Siemens Healthcare Poland,
in connection with an investigation regarding a public tender
issued by the hospital of Wroclaw in 2008. According to the AWB,
the Siemens employee and the deputy hospital director are
accused of having manipulated the tender procedure. In October
2010, the investigation was closed.
In April 2009, the Defense Criminal Investigative Service of the
U.S. Department of Defense conducted a search at the
premises of Siemens Medical Solutions USA, Inc. in Malvern,
Pennsylvania, in connection with an investigation relating to a
Siemens contract with the U.S. Department of Defense for
the provision of medical equipment.
In June 2009, Siemens AG and two of its subsidiaries voluntarily
self-reported, among others, possible violations of
U.S. Export Administration Regulations to the responsible
U.S. authorities.
47
As previously reported, since July 2009 the EU Anti-Fraud Office
OLAF, its Romanian equivalent DELAF and the Romanian public
prosecutor DNA have been investigating allegations of fraud in
connection with the 2007 award of a contract to FORTE Business
Services (now Siemens IT Solutions and Services Romania) to
modernize the IT infrastructure of the Romanian judiciary. On
September 2, 2010, OLAF put the matter on monitoring status
and decided not to open formal proceedings. DELAF referred the
matter to DNA and closed its investigations.
In addition to the investigations and legal proceedings
described above, Siemens AG and its subsidiaries have been named
as defendants in various other legal actions and proceedings
arising in connection with their activities as a global
diversified group. Some of these pending proceedings have been
previously disclosed. Some of the legal actions include claims
or potential claims for punitive damages or claims for
indeterminate amounts of damages. Siemens is from time to time
also involved in regulatory investigations beyond those
described above. Siemens is cooperating with the relevant
authorities in several jurisdictions and, where appropriate,
conducts internal investigations regarding potential wrongdoing
with the assistance of in-house and external counsel. Given the
number of legal actions and other proceedings to which Siemens
is subject, some may result in adverse decisions. Siemens
contests actions and proceedings when it considers it
appropriate. In view of the inherent difficulty of predicting
the outcome of such matters, particularly in cases in which
claimants seek indeterminate damages, Siemens may not be able to
predict what the eventual loss or range of loss related to such
matters will be. The final resolution of the matters discussed
in this paragraph could have a material effect on Siemens
business, results of operations and financial condition for any
reporting period in which an adverse decision is rendered.
However, Siemens currently does not expect its business, results
of operations and financial condition to be materially affected
by the additional legal matters not separately discussed in this
paragraph.
48
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ITEM 4A:
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UNRESOLVED
STAFF COMMENTS
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Not applicable.
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ITEM 5:
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OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
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Introduction
This
Form 20-F
contains forward-looking statements and informationthat
is, statements related to future, not past, events. These
statements may be identified by words such as
expects, looks forward to,
anticipates, intends, plans,
believes, seeks, estimates,
will, project or words of similar
meaning. Such statements are based on the current expectations
and certain assumptions of Siemens management, and are,
therefore, subject to certain risks and uncertainties. A variety
of factors, many of which are beyond Siemens control,
affect Siemens operations, performance, business strategy
and results and could cause the actual results, performance or
achievements of Siemens to be materially different from any
future results, performance or achievements that may be
expressed or implied by such forward-looking statements. In
particular, Siemens is strongly affected by changes in general
economic and business conditions as these directly impact its
processes, customers and suppliers. This may negatively impact
our revenue development and the realization of greater capacity
utilization as a result of growth. Yet due to their diversity,
not all of Siemens businesses are equally affected by
changes in economic conditions; considerable differences exist
in the timing and magnitude of the effects of such changes. This
effect is amplified by the fact that, as a global company,
Siemens is active in countries with economies that vary widely
in terms of growth rate. Uncertainties arise from, among other
things, the risk of customers delaying the conversion of
recognized orders into revenue or cancellations of recognized
orders, of prices declining as a result of continued adverse
market conditions by more than is currently anticipated by
Siemens management or of functional costs increasing in
anticipation of growth that is not realized as expected. Other
factors that may cause Siemens results to deviate from
expectations include developments in the financial markets,
including fluctuations in interest and exchange rates (in
particular in relation to the U.S. dollar), in commodity
and equity prices, in debt prices (credit spreads) and in the
value of financial assets generally. Any changes in interest
rates or other assumptions used in calculating pension
obligations may impact Siemens defined benefit obligations
and the anticipated performance of pension plan assets resulting
in unexpected changes in the funded status of Siemens
pension and post-employment benefit plans. Any increase in
market volatility, further deterioration in the capital markets,
decline in the conditions for the credit business, continued
uncertainty related to the subprime, financial market and
liquidity crises, or fluctuations in the future financial
performance of the major industries served by Siemens may have
unexpected effects on Siemens results. Furthermore,
Siemens faces risks and uncertainties in connection with certain
strategic reorientation measures; the performance of its equity
interests and strategic alliances; the challenge of integrating
major acquisitions and implementing joint ventures and other
significant portfolio measures; the introduction of competing
products or technologies by other companies or market entries by
new competitors; changing competitive dynamics (particularly in
developing markets); the risk that new products or services will
not be accepted by customers targeted by Siemens; changes in
business strategy; the outcome of pending investigations, legal
proceedings and actions resulting from the findings of, or
related to the subject matter of, such investigations; the
potential impact of such investigations and proceedings on
Siemens business, including its relationships with
governments and other customers; the potential impact of such
matters on Siemens financial statements, and various other
factors. More detailed information about certain of the risk
factors affecting Siemens is contained throughout this report
and in Siemens other filings with the SEC, which are
available on the Siemens website, www.siemens.com, and on the
SECs website, www.sec.gov. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those described in the relevant forward-looking statement
as expected, anticipated, intended, planned, believed, sought,
estimated or projected. Siemens neither intends to, nor assumes
any obligation to, update or revise these forward-looking
statements in light of developments which differ from those
anticipated.
The following discussion of our financial condition and results
of operations should be read in conjunction with our
Consolidated Financial Statements and the related Notes prepared
in accordance with IFRS, as issued by
49
the IASB and as adopted by the EU, as described in Notes
to Consolidated Financial Statements as of, and for the
years ended, September 30, 2010, 2009 and 2008.
In this report, we present a number of supplemental financial
measures that are or may be non-GAAP financial
measures as defined in the rules of the SEC. For
definitions of these financial measures and a discussion of the
most directly comparable IFRS financial measures, the usefulness
of Siemens supplemental financial measures, the
limitations associated with these measures and reconciliations
to the most comparable IFRS financial measures, see
Supplemental financial measures.
Business
and operating environment
The
Siemens GroupOrganization and basis of
presentation
We are a globally operating, integrated technology company with
core activities in the fields of industry, energy and
healthcare, and we occupy leading market positions worldwide in
the majority of our businesses. We can look back on a successful
history spanning more than 160 years, with groundbreaking
and revolutionary innovations such as the invention of the
dynamo, the first commercial light bulb, the first electric
streetcar, the construction of the first public power plant, and
the first images of the inside of the human body. We have more
than 400,000 employees and business activities in around
190 countries, and reported consolidated revenue of
75.978 billion in fiscal 2010. Our production
capacity is distributed across more than 300 production and
manufacturing plants worldwide. In addition, we have office
buildings, warehouses, research and development facilities or
sales offices in almost every country in the world.
Siemens comprises Siemens AG, a stock corporation under the
Federal laws of Germany, as the parent company and a total of
about 1,000 legal entities, including minority investments. Our
Company is incorporated in Germany, with our corporate
headquarters situated in Munich. Siemens operates under the
leadership of its Managing Board, which comprises the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO) of
Siemens as well as the heads of selected corporate functions and
the CEOs of the three Sectors.
Our fundamental organizational principles are:
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the CEO principle,
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end-to-end
business responsibility of the Sectors, Divisions and Business
Units and
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the unrestricted right of selected corporate functions to issue
instructions in relation to a function as far as legally
possible.
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The Siemens Managing Board is the sole management body and has
overall business responsibility in accordance with the German
Stock Corporation Act (Aktiengesetz, AktG). At all other
organizational levels within our Company, management
responsibility is assigned to individuals who make decisions and
assume personal responsibility (CEO principle). This principle
establishes clear and direct responsibilities and fosters
efficient decision-making.
Our Sectors, Divisions, Business Units and Cross-Sector
Businesses are global entrepreneurs and have
end-to-end
business responsibility worldwide, including with regard to
their operating results. They therefore have right of
way over the Clusters and Countries in business matters.
The regional units (Clusters and Countries) are responsible for
the local Customer Relationship Management and for implementing
the business strategies of the Sectors and Cross-Sector
Businesses as well as the requirements set by the corporate
functions.
In addition to their particular authority to issue binding
company-wide guidelines and to their monitoring and coordinating
responsibilities, the heads of selected corporate functions
(Finance and Controlling, Legal and Compliance, Human Resources
and Supply Chain Management, for example) have an unrestricted
right to issue instructions in relation to a function across all
parts of the company as far as legally possible.
Below the Managing Board, Siemens is structured organizationally
into three Sectors, two Cross-Sector Businesses that act as
business partners for the Sectors and also conduct their own
business with external customers,
50
Cross-Sector Services that support other Siemens units,
Corporate Units with specific corporate functions, and Regional
Clusters. The Sectors are broken down into Divisions and these
in turn into Business Units.
Our business activities focus on our three Sectors, Industry,
Energy and Healthcare, which form three of our reportable
segments. In addition to our three Sectors, we have three
additional reportable segments: Equity Investments and our two
Cross-Sector Businesses Siemens IT Solutions and Services and
Siemens Financial Services (SFS).
During fiscal 2010, Siemens initiated a change in the
organizational structure of its Healthcare Sector which became
effective October 1, 2010 as described in greater detail in
Item 4: Information on the CompanyDescription
of businessHealthcare. Financial reporting for
fiscal 2010 continued to be based on the organizational
structure effective until September 30, 2010. The
Diagnostics Division was not affected by the reorganization.
Our Industry Sector offers a complete spectrum of
products, services and solutions for the efficient use of
resources and energy, and improvements of productivity in
industry and infrastructure. Its integrated technologies and
holistic solutions address primarily industrial customers, such
as process and manufacturing industries, and infrastructure
customers, especially in the areas of transport, buildings and
utilities. The portfolio spans industry automation and drives
products and services, building, lighting and mobility solutions
and services, and system integration and solutions for plant
businesses. Our Industry Sector comprises the six Divisions,
Industry Automation, Drive Technologies, Building Technologies,
OSRAM, Industry Solutions and Mobility. Many of the business
activities of Industry Automation and OSRAM are characterized by
relatively short business cycles and as such are influenced by
prevailing economic conditions. In contrast, the longer-cycle
business activities of the Mobility Division are less affected
by short-term trends. The Industry Sector currently has
204,000 employees, and in fiscal 2010 reported external
revenue of 33.728 billion. Of this figure, 54% was
attributable to the region comprising Europe, the Commonwealth
of Independent States (C.I.S.), Africa and the Middle East, 24%
to the Americas, and 22% to Asia, Australia. The largest single
national market for the Industry Sector is Germany, with 20% of
external revenue for the Sector during fiscal 2010.
Our Energy Sector offers a wide spectrum of products,
services and solutions for the generation, transmission and
distribution of power, and the extraction, conversion and
transport of oil and gas. It primarily addresses the needs of
energy providers, but also serves industrial companies,
particularly in the oil and gas industry. The Energy Sector
covers the whole energy conversion chain. Our Energy Sector is
made up of the six Divisions, Fossil Power Generation, Renewable
Energy, Oil & Gas, Energy Service, Power Transmission
and Power Distribution. Financial results relating to the Energy
Service Division are reported in the Divisions Fossil Power
Generation and Oil & Gas. Many of the business
activities of our Energy Sector are characterized by relatively
long-term projects and as such are relatively independent of
short-term economic conditions. The Energy Sector currently has
88,000 employees and reported external revenue of
25.204 billion for fiscal 2010. Thereof, 59% was
attributable to Europe, C.I.S.,
51
Africa, Middle East, 26% to the Americas, and 15% to Asia,
Australia. The United States (U.S.) was the largest single
national market for Energy in fiscal 2010, accounting for 14% of
external revenue for the Sector.
Our Healthcare Sector offers customers a comprehensive
portfolio of medical solutions across the value-added
chainranging from medical imaging to in vitro
diagnostics to interventional systems and clinical information
technology systemsall from a single source. In addition,
the Sector provides technical maintenance, professional and
consulting services, and, together with SFS, financing to assist
customers in purchasing the Sectors products. Until
September 30, 2010, our Healthcare Sector was composed of
the three Divisions, Imaging & IT,
Workflow & Solutions and Diagnostics. In fiscal 2010,
we initiated a change of the organizational structure of our
Healthcare Sector effective as of October 1, 2010, which
led to changes at the divisional level. Following the
reorganization, the Sector comprises the three Divisions Imaging
and Therapy Systems, Clinical Products and Diagnostics. The
Diagnostics Division was not affected by the organizational
change. Financial reporting for fiscal 2010 continued to be
based on the organizational structure effective until
September 30, 2010. The Sectors business activities
are relatively unaffected by short-term economic trends but are
dependent on regulatory and policy developments around the
world, particularly including the healthcare reform in the
U.S. The Healthcare Sector currently has
49,000 employees, and in fiscal 2010 reported external
revenues of 12.280 billion. Of this figure, 38% was
attributable to the region comprising Europe, C.I.S., Africa and
the Middle East, 42% to the Americas, and 20% to Asia,
Australia. By far the largest single national market for
Healthcare is the U.S., with 36% of external revenue for the
Sector during fiscal 2010.
In general, Equity Investments comprises equity stakes
held by Siemens that are accounted for by the equity method, at
cost or as current
available-for-sale
financial assets and which are not allocated to a Sector, a
Cross-Sector Business, Siemens Real Estate (SRE), Pensions or
Corporate Treasury for strategic reasons. Our main investments
within Equity Investments are our stake of approximately 50.0%
in Nokia Siemens Networks B.V. (NSN), our 50.0% stake in BSH
Bosch und Siemens Hausgeräte GmbH (BSH), our 49.0% stake in
Krauss-Maffei Wegmann GmbH & Co. KG (KMW), our 50.0%
stake in ELIN GmbH & Co. KG, our 49.0% stake in
Enterprise Networks Holdings B.V. (EN) as well as our 19.8%
stake in GIG Holding GmbH (formerly named ARQUES Value
Development GmbH).
Siemens IT Solutions and Services designs, builds and
operates both discrete and large scale information and
communications systems and offers comprehensive information
technology and communications solutions from a single source
both to third parties and to other Siemens entities. Siemens IT
Solutions and Services currently has 32,000 employees and
reported external revenue of 3.150 billion for fiscal
2010.
Siemens Financial Services is an international provider
of financial solutions in the
business-to-business
area. SFS supports Siemens as well as third parties in the three
industry areas of industry, energy, and healthcare. SFS finances
infrastructure, equipment and working capital and supports and
advises Siemens concerning financial risk and investment
management. By integrating financing expertise and industrial
know-how, SFS creates value for its customers and helps them
strengthen their competitiveness. SFS currently has
2,000 employees. As of October 1, 2010, Siemens
Financial Services was renamed Financial Services in connection
with an application Siemens filed in Germany for a license to
conduct banking business.
Within this report, we provide financial measures for our three
Sectors, our Cross-Sector Business Siemens IT Solutions and
Services and for 14 Divisions of our Sectors. These financial
measures include: new orders, revenue, profit and profit margin.
For Equity Investments we report profit, and for SFS we report
profit and total assets. Free cash flow and further information
is reported for each reportable segment in the Notes to
Consolidated Financial Statements. For information related
to the definition of these financial measures and to the
reconciliation of segment financial measures to the consolidated
financial statements, see Supplemental financial
measures as well as Notes to Consolidated Financial
Statements.
52
On a geographic basis, Siemens is subdivided into 17 Regional
Clusters, which are in turn assigned to one of our three
reporting regions. We report financial measures for these three
regions:
In addition, we report financial information at group level for
certain major countries within each region, including Germany
(within the region Europe, C.I.S., Africa, Middle East), the
U.S. (within the region Americas), and China and India
(within the region Asia, Australia).
Financial
performance measures
The section Financial performance measures includes
several measures that are or may be non-GAAP financial measures.
For further information about these measures, please see
Supplemental financial measures.
Other companies that report or describe similarly titled
financial measures may calculate them differently.
Fit42010
program
In fiscal 2007, we initiated our
Fit42010
program, which continued through fiscal 2010. Beginning with
fiscal 2011, One Siemens will be our framework for
capital-efficient growth and sustainable value creation. For
further information, see Item 4: Information on the
CompanyStrategyStrategy of the Siemens Group.
Our
Fit42010
program entailed financial performance measures focused on
growth, profitability, capital efficiency, cash conversion, and
optimization of our capital structure. These measures were
selected to help us drive the value and competitiveness of our
Company and strengthen our leadership positions or close the gap
to our competitors. We had set ambitious targets for all our
financial performance measures that we aimed to achieve by the
end of fiscal 2010. These targets were established with normal
business cycles in mind, i.e., without taking into account the
global recession caused by the financial crisis and its
aftereffects on our business over the past two fiscal years. Our
ability to achieve these targets in the current fiscal year was
further affected by fourth quarter pre-tax impairment charges of
1.204 billion at our diagnostics business and pre-tax
charges of 460 million related to the strategic
reorientation of Siemens IT Solutions and Services. For
comparison, the prior-year period was influenced by pre-tax
impairment charges totaling 1.850 billion related to
NSN.
Operational
performance measures
The first
Fit42010
operational performance measure focused on growth in order to
ensure the revenue development required to produce income
growth. Our goal was to grow annual revenue on an organic basis,
excluding currency translation and portfolio effects, at twice
the rate of global gross domestic product (GDP) growth. In
fiscal 2010, revenue declined 3% on an organic basis compared to
the prior-year period. For the calendar year 2010, IHS Global
Insight is predicting that real global GDP will grow by 3.8%.
During the aggregate period in
53
which we applied
Fit42010,
we achieved a compound annual growth rate for organic revenue of
4%, which is two times the level of real global GDP growth
reported by IHS Global Insight, Inc. for this period.
Under
Fit42010,
our primary measure for the conversion of revenue to income was
profit margin, applied and reported at the Sector, Division and
Cross-Sector Business levels. For our Sectors, Divisions and for
Siemens IT Solutions and Services, profit margin was calculated
as the ratio of profit to revenue; except as indicated below,
profit for these businesses was defined consistently with the
segment measure for profitability in the Notes to
Consolidated Financial Statements, i.e., earnings before
financing interest, certain pension costs, and income taxes, and
also may exclude various categories of items, which are not
allocated to these businesses since management does not regard
such items as indicative of their performance. For purposes of
comparison with the target margin ranges, profit for the
Diagnostics Division and the Healthcare Sector was adjusted for
purchase price allocation (PPA) effects and integration costs.
In contrast, and in line with common practice in the financial
services industry, the
Fit42010
capital efficiency measure for SFS was return on equity (ROE),
defined as Income before income taxes (i.e., the segment measure
for profitability) divided by the average allocated equity for
SFS.
Our
Fit42010
target ranges and the fiscal 2010 performance results of our
Sectors, Divisions and Cross-Sector Businesses are shown below.
The impairment charges mentioned above in relation to
Diagnostics reduced profit margin for the Heathcare Sector by
9.7 percentage points and profit margin for the Diagnostics
Division by 32.8 percentage points in the current fiscal
year.
54
Our
Fit42010
capital efficiency measure was return on capital employed
(ROCE). This measure assesses our income generation from the
point of view of our shareholders and creditors, who provide us
with capital. Siemens weighted average cost of capital
(WACC) is currently estimated at approximately 7.5%.
ROCE under
Fit42010
was defined as Income from continuing operations (before
interest) divided by average capital employed. For further
information, see Supplemental financial measures.
Our
Fit42010
target was to achieve ROCE in the range of 1416%. ROCE in
the fiscal years 2010, 2009 and 2008 was 10.4%, 6.1% and 4.8%,
respectively. The total of the above-mentioned impairment
charges related to Diagnostics and the above-mentioned charges
related to the strategic reorientation of Siemens IT Solutions
and Services reduced ROCE by 3.6 percentage points in
fiscal 2010. For comparison, the above-mentioned impairment
charges related to NSN reduced ROCE by 4.6 percentage
points in fiscal 2009.
Cash conversion rate was our liquidity measure in our
Fit42010
program. It showed us how much of our income we were converting
to Free cash flow. The calculation of the cash conversion rate
is shown below. Free cash flow, as presented in the Notes
to Consolidated Financial Statements, is defined as Net
cash provided by (used in) operating activities (continuing
operations) minus Additions to intangible assets and property,
plant and equipment (continuing operations). Our target for the
cash conversion rate was 1 minus our annual organic revenue
growth rate. Our cash conversion rate was 1.73 in fiscal 2010,
above the target of 1.03. The total of the above-mentioned
impairment charges related to Diagnostics and the
above-mentioned charges related to the strategic reorientation
of Siemens IT Solutions and Services increased the cash
conversion rate by 0.44 in fiscal 2010. For comparison, the
above-mentioned impairment charges related to NSN increased the
cash conversion rate by 0.66 in fiscal 2009. During the
aggregate period in which we applied
Fit42010,
we achieved a cash conversion rate of 1.50. Considering a
compound annual growth rate for organic revenue of 4%, our
target for cash conversion rate was 0.96 for this period.
Capital
structure management
As part of the
Fit42010
program, we also adopted a measure to assess our capital
structure management and complement our operational performance
measures. A key consideration for us in this regard is
maintenance of
55
ready access to the capital markets through various debt
products and preservation of our ability to repay and service
our debt obligations over time.
For purposes of the
Fit42010
program, we calculated our capital structure measure as the
ratio of adjusted industrial net debt to adjusted EBITDA. For
further information on this calculation and the respective
components, see Liquidity and capital
resourcesCapital structure and Supplemental
financial measures. We aimed to achieve a ratio in the
range of 0.81.0. However, in light of the global economic
crisis we consciously chose to not adjust our capital structure
by increasing our debt to the extent originally planned. Our
capital structure ratio for fiscal 2010 was 0.08.
One
Siemens
As of fiscal 2011, we introduced One Siemensour
framework for sustainable value creation (for further
information, see Item 4: Information on the
CompanyStrategyStrategy of the Siemens Group).
As part of One Siemens, we have developed a financial target
system for capital-efficient growth that we believe will drive
the value of our Company. Our goal is to achieve continuous
improvement relative to the market and our competitors. The
financial target system of One Siemens defines indicators for
revenue growth, capital efficiency and profitability, the
optimization of our capital structure, and our dividend policy.
In addition, we set hurdle rates that generally need to be
considered before acquisitions are executed.
Revenue
growth
We believe that an important driver for increasing our
Companys value over the long term is profitable revenue
growth. Specifically, our goal is to grow our revenue faster
than the average revenue growth of our most relevant
competitors. For purposes of comparison to the revenue growth of
our competitors, our revenue growth is calculated as the growth
rate of reported revenue (as presented in the Consolidated
Financial Statements) over a rolling twelve-month period
compared to the same period a year earlier.
Capital
efficiency and profitability
Our aim is to work profitably and as efficiently as possible
with the capital of our shareholders and lenders. We previously
monitored our capital efficiency using the indicator return on
capital employed (ROCE). As part of One Siemens, we are
introducing an advanced financial indicator, ROCE
(adjusted), which is reported on a continuing basis, that
adjusts ROCE primarily to consider pension underfunding as
financing, to increase comparability of the metric with
competitors, particularly with respect to the finance business,
and to align with our definition of adjusted industrial net
debt. For information on the calculation of ROCE (adjusted), see
Supplemental financial measures. Our target is to
achieve ROCE (adjusted) in the range of 1520%. For
comparison, our ROCE (adjusted) on the basis of reported figures
was 13.0% in fiscal 2010 and 7.9% in fiscal 2009.
In line with common practice in the financial services industry,
return on equity or ROE (after tax) will be our advanced
financial indicator for measuring capital efficiency at SFS.
Starting with fiscal 2011, we will define ROE (after tax) as
SFS Profit after tax (annualized for purposes of interim
reporting), divided by SFS average allocated equity. Taxes
will be calculated based on a flat tax rate of 30% of the Profit
of SFS, excluding Income (loss) from investments accounted for
using the equity method, net allocated to SFS, as well as
tax-free income components. Our target is to achieve ROE (after
tax) at SFS in the range of 1520%.
56
We intend to maintain and further improve the profitability of
our businesses. Our goal is to achieve margins on the level of
the best competitors in our industriesthroughout the
complete business cycle. Our adjusted EBITDA margins will be
defined as the ratio of adjusted EBITDA (as presented in
Reconciliation to adjusted EBITDA (continuing
operations)) to revenue (as presented in the Notes
to Consolidated Financial Statements). We have defined
adjusted EBITDA margin ranges for the respective industries of
our three Sectors. These margin ranges are 1015% for the
industries that our Sectors Industry and Energy operate in, and
1520% in the healthcare industry. Starting with fiscal
2011, central infrastructure costs will be allocated primarily
to our Sectors and will impact our adjusted EBITDA margins (for
further information, see Notes to Consolidated Financial
Statements).
Capital
structure
Sustainable profit and revenue can only be achieved on the basis
of a healthy capital structure. Therefore, we continue to use
our
Fit42010
indicator for optimizing our capital structure, defined as the
ratio of adjusted industrial net debt to adjusted EBITDA. For
One Siemens, we advanced our definition of adjusted industrial
net debt as compared to the definition used under
Fit42010.
Going forward, the calculation of adjusted industrial net debt
will include an adjustment for Pension plans and similar
commitments (as presented in the Consolidated Financial
Statements), in order to consider our total pension
liability. Accordingly, adjustments will no longer be made only
for the Funded status of principal pension benefit plans and for
the Funded status of principal other post-employment benefit
plans which only represented a part of our total pension
liability. For further information on this calculation, see
Supplemental financial measures. Our future target
is to achieve a ratio in the range of 0.51.0. For
comparison, our One Siemens capital structure ratio was 0.22 in
fiscal 2010 and 0.45 in fiscal 2009.
Dividend
policy
With One Siemens, we want to provide an attractive dividend
payout to our investors. We have therefore set a target for our
dividend payout ratio, defined as the ratio of the total
dividend payout to Net income (as presented in the
Consolidated Financial Statements). In future, we
aim to propose an annual dividend payout ratio of 3050% of
Net income to our shareholders. For these purposes, the
percentage calculation will take into account exceptional
non-cash effects within income. We intend to fund the dividend
payout from our Free cash flow.
Additional
indicators
In addition to the financial indicators discussed above, we use
several other metrics to assess the economic success of our
business activities. To determine whether a particular
investment is likely to generate value for Siemens, we use net
present value or economic value added
(EVAtm).
EVAtm
considers the cost of capital in calculating value creation by
comparing the expected earnings of an investment against the
cost of capital employed.
EVAtm
will also be an indicator for measuring capital efficiency in
our Sectors and Cross-Sector Businesses. To measure our
liquidity management, we analyze the net working capital turns
of our operating activities, as well as the capital expenditure
rate, defined as Additions to intangible assets and property,
plant and equipment as a percentage of amortization and
depreciation. For our capital expenditure rate, we have set a
target range of 95115% (for further information, see
Liquidity and capital resourcesCapital resources and
requirements). In addition, we set hurdle rates that
generally need to be considered before acquisitions are
executed. In general, acquisitions need to be
EVAtm
accretive within two years after the closing of the transaction
and need to be in line with our ROCE (adjusted) target within
three years after the closing of the transaction.
57
Economic
environment
Worldwide
economic environment
Following the most serious economic downturn since the end of
the Second World Warwhich in 2009 led to a contraction of
1.8% in global gross domestic product (GDP) in real terms
according to figures from IHS Global Insightthe global
economy saw a recovery in the first half of 2010 that was faster
and more dynamic than forecasted. The pace of growth is slowing
slightly in the second half of the year as government fiscal
stimulus packages are winding down and the boost from the
restocking of inventories tails off. IHS Global Insight is
predicting overall growth of 3.8% in global GDP for 2010.
From a regional perspective, the Europe, Commonwealth of
Independent States (C.I.S.), Africa, Middle East
regionwhich among our three reporting regions reported
the sharpest downturn in gross domestic product in 2009is
also experiencing the slowest growth in 2010 with a forecasted
increase in GDP of 2.4%. Within this region, Middle Eastern and
African countries are seeing the most rapid growth. In 2010,
many of these countries are benefiting from a recovery in
commodity prices. The countries in our Russia/Central Asia
Cluster were hit particularly hard by the economic downturn and
are recovering gradually. In the case of Russia, IHS Global
Insight is forecasting growth of 4.2% in 2010 following a 7.9%
drop in GDP in 2009. However, the positive impact from commodity
price gains compared with 2009 is being tempered by the delayed
consequences of the financial crisis and the effects of an
extended period of exceptionally high temperatures and drought.
Within Europe, there is a significant divergence in economic
trends. Whereas most of the countries in central and eastern
Europe are slowly recovering from the economic downturn,
economies in some of the southern and western European countries
impacted by the sovereign debt crisis are stagnating or
contracting. IHS Global Insight is expecting German GDP to grow
by 3.3% this year compared with a fall of 4.7% in 2009. The
German economy, which last year suffered from the sharp downturn
in global trade, is benefiting in 2010 from strong international
demand for high-quality capital equipment. Despite the end of
economic stimulus packages, automotive exports have also seen a
substantial upturn in 2010, driven particularly by strong demand
from Asia. A number of other European countries that are closely
linked to the German export industry are likewise benefiting
from the economic expansion in Germany.
In the Americas region, IHS Global Insight is forecasting
GDP growth of 3.2% in 2010 compared with a contraction of 2.4%
in 2009. GDP is expected to climb substantially in the majority
of Latin American countries during 2010. Brazil, which is
forecast to achieve GDP growth of 7.4% in 2010 compared with a
slight fall of 0.2% in 2009, represents a significant growth
driver. The U.S. is providing a somewhat weaker stimulus
for growth. After a 2.6% contraction in U.S. GDP in 2009,
IHS Global Insight predicts that the situation will reverse in
2010 with growth of the same percentage, with growth slowing
noticeably during the second half of the year compared to the
first half. Any upward trend in consumer spending has been
extremely muted owing to rising unemployment and a
58
greater proportion of disposable income allocated to savings.
The problems in real estate marketswhich triggered the
global economic downturnhave been exacerbated again by the
end of tax breaks. Growth in the U.S. is also being held
back by a substantial current-account deficit as imports rise
faster than exports.
GDP in the Asia, Australia region, which managed to
expand even during the economic downturn, is expected to climb
sharply in 2010 with growth forecast at 6.5%. This boost to
growth was initially driven by fiscal stimulus packages.
However, exports have also picked up again as the global economy
has recovered. In addition, economic growth is being given
further momentum by rising consumer demand in the emerging
markets in this region. With regard to China, IHS Global Insight
is predicting growth of 10.3% for 2010, which is above the 9.1%
GDP growth achieved in 2009. China is therefore proving to be an
engine of growth for the global economy, although the
significant growth in the first half of 2010 is expected to ease
off during the second half of the year as the boost from
economic stimulus packages fades, the rise in lending is curbed
by central banks, and growth in key export markets remains weak.
The rise in growth in India, which has the benefit of a large
domestic market and low dependency on exports, continues
unabated. IHS Global Insight predicts GDP growth of 8.2% for
2010 following the 6.8% growth achieved in 2009.
A key factor for Siemens as a manufacturer is manufacturing
value added, a component used in calculating gross domestic
product by means of the production approach. Following a fall in
manufacturing value added of 6.5% in 2009, IHS Global Insight
forecasts an increase of 10.1% in real terms in 2010. The Asia,
Australia region is the driver for this growth with an expected
year-on-year
increase of 15.4%.
A key factor for Siemens, as a plant and infrastructure
provider, is the trend in gross fixed investments, one of
the ways in which gross domestic product is used. This trend is
heavily influenced by fluctuations in the economic cycle. IHS
Global Insight is predicting growth of 5.0% in gross fixed
investments for 2010 following a fall of 7.1% in real terms in
2009. For Europe, C.I.S., Africa, Middle East, the region
that accounts for the greatest proportion of Siemens
revenue, IHS Global Insight is forecasting that gross fixed
investments will increase by only 0.6% in 2010 compared with a
contraction of 11.2% in 2009. Gross fixed investments in the
Americas region are expected to grow by 4.7% in 2010,
whereas the metric fell by 13.3% in 2009. Within this region, it
is the trend in Brazil that is the most notable. IHS Global
Insight is forecasting that Brazil will see growth of 16.9% in
gross fixed investments in 2010, a turnaround from the
contraction of 9.9% in 2009. In the U.S., where there was a
dramatic fall in gross fixed investments in 2009, such
investments are expected to grow by just 2.5% in 2010. In 2009,
the only region with growth in gross fixed investments was the
Asia, Australia region where the metric was up by 4.3%.
According to IHS Global Insight forecasts, growth in Asia,
Australia will accelerate to 9.8% in 2010. Within the region,
the growth in gross fixed investments in China is expected to
fall from 17.7% in 2009 to 15.4%, although this figure still
remains very high. Growth in gross fixed investments in India is
predicted to gain significant momentum from 5.2% in 2009 to
10.1% in 2010.
59
The figures presented here for gross domestic product and gross
fixed investments are drawn from an IHS Global Insight report
dated October 15, 2010. The figures on manufacturing value
added are drawn from an IHS Global Insight report dated
October 22, 2010. Siemens has not independently verified
this data.
In addition to the common currency of the European Monetary
Union (the euro) other key currencies for Siemens include the
U.S. dollar and the British pound. The start of the first
quarter of fiscal 2010 saw a continuation of the trend that
began during the middle of the 2009 fiscal year in which the
euro strengthened against both the U.S. dollar and the
British pound. The end of the first quarter of fiscal 2010 was
marked by the start of a significant drop in the value of the
euro, although the weakening was greater against the
U.S. dollar than against the British pound. The main reason
for this fall in the euros value was the worsening of the
sovereign debt crisis in the spring of 2010 in a number of
southern and western European member states of the European
Monetary Union, which required support programs from the
International Monetary Fund and the European Union. Increasing
concerns about the sustainability of the economic upturn in the
U.S. and the U.K., together with simultaneous robust
economic growth in key European countries, resulted in a rise in
the value of the euro against the currencies of both countries
beginning in June 2010. This trend was reinforced at the end of
fiscal 2010 by expectations that the central banks in the
U.S. and the U.K. would undertake additional expansionary
monetary policy measures.
Our businesses are also dependent on the development of raw
material prices. Key materials to which we have significant cost
exposure include copper, various grades and formats of steel,
and aluminum. In addition, within stainless steel we have
considerable exposure related to nickel and chrome alloy
materials.
The price of copper (denominated in EUR per metric ton) gained
approximately 41% since the beginning of fiscal 2010, and nearly
200% compared to the lowest values in December 2008. Prices for
copper are pushed both by supply and demand fundamentals and by
speculative influences in the commodity markets. Prices
anticipate that the supply of copper is tightening.
Nevertheless, as copper is produced in multiple locations and
traded, such as across the London metal exchange, the risk to
Siemens is primarily a price risk rather than a supply risk.
Aluminum prices rose approximately 33% over the past fiscal year
and approximately 73% since the low values of December 2008.
Aluminum prices have been driven mainly by fundamentals, i.e.,
higher demand and especially rising energy costs, while
speculative elements had only transitional effects on aluminum
prices. As with copper, we see developments in the aluminum
market as posing a price risk, rather than a supply risk.
Steel prices gained approximately 27% on rising production in
the current fiscal year and approximately 53% since the low
levels reported by CRU (an independent business analysis and
consultancy group focused on, among other things, the mining and
metals sectors) for April 2009 while demand grew at a slower
pace. Prices in general are pushed upwards by rising raw
material costs, for example, significantly higher costs for iron
ore. The market has seen a series of mini-cycles due to the
combined effects from real demand, restocking in the supply
chain and various premature attempts from steel mills to raise
prices. A new pricing scheme between iron ore producers and
60
steel mills (switching from annual pricing to quarterly pricing)
is expected to add more flexibility and volatility to steel
prices in the future.
Our main exposure to the prices of copper and related products,
and to steel and stainless steel, is in the Industry and Energy
Sectors. Our main price exposure to aluminum is in the Industry
Sector. Additionally Siemens is generally exposed to energy
prices, both directly (electricity, gas, oil) and indirectly
(energy used in the manufacturing processes of suppliers).
Siemens uses several options in order to reduce the price-risk
in its project and product businesses, such as long-term
contracting with suppliers, physical and financial hedging and
price escalation clauses with customers.
Market
development
According to market research published by IHS Global Insight in
July 2010, nominal capital expenditures are rising in 2010 in
almost all market segments that are significant for our Sectors
and for Siemens IT Solutions and Services. In most of these
markets, the growth in investments is more than offsetting the
(in some cases sharp) decline in investing activities in the
previous year. This trend is driven to a significant extent by
the dynamic development in emerging markets, especially China,
while the investment volumes in a number of industrialized
nations continue to decline in 2010.
In the markets that are significant for our Industry
Sector, gross capital expenditure is rising sharply in most
segments in 2010, following the downturn of the previous year,
which had been impacted by the economic downturn. The highest
year-on-year
growth rate is expected to be achieved in the metals and mining
sector, where investments are forecasted to grow by a
mid-double-digit percentage, after a contraction of around 5% in
the previous year. Stimulated by the economic recovery, rising
demand for commodities is having a positive impact on
investments in both extraction and processing in this sector.
For the machine-building and the oil and gas industries,
lower-double-digit growth rates are expected for 2010.
Investments in machine-building expanded by around 9% in 2009,
driven by China, which has the worlds largest
machine-building sector. For 2010, growth in Chinas
capital expenditure is expected to slow somewhat to what will
still be a very high level. At the same time, investments in
machine-building are stabilizing in a number of other countries.
By contrast, capital expenditure in the oil and gas industry
declined sharply in the previous year. The increase forecast for
2010 is not expected to be large enough to compensate for the
previous years decline. Growth rates of around 10% are
expected for the automotive and chemical industries in 2010.
Investments in the automotive industry declined by some 8% in
the previous year, primarily due to developments in
industrialized nations. In 2010, replacement investments are
forecasted to stabilize the situation in a number of
industrialized economies. Brazil appears to be set to expand at
a very buoyant pace, while Chinas growth rate will decline
slightly but still remain at a very high level. In the chemical
industry, where investments rose marginally in 2009, growth has
likewise been spurred by emerging economies, while investments
in some industrialized countries such as Japan and the
U.S. are increasing modestly or stagnating in 2010
following significant declines in the previous year. Investments
in the transportation services, post and logistics, electrical
and electronics, and the pulp and paper industries, which
contracted by mid-single-digit percentages in the previous year,
are expected to grow by around 9% in each case in 2010. The food
and beverage industry, which is impacted to a lesser extent by
economic downturns, recorded stable investments in 2009 and is
also forecast to expand its capital expenditure by around 9% in
2010. A return to rising consumer confidence has a
61
positive effect. Investments in the transportation and
infrastructure industry are anticipated to rise by around 7% in
2010, following a decline of around 4% in 2009. For the
transport equipment sector, which stagnated in the previous
year, capital expenditure is expected to rise by around 5% in
2010. The retail industry, which is benefiting from increased
consumer confidence, is also expected to invest around 5% more
in capital goods this year, although this rise likely will not
be able to offset the previous years decline of around 6%.
Investments are expected to decline further in the construction
and real estate industry. After a decline of around 10% in 2009,
IHS Global Insight forecasts another 2% fall in investments for
the current year. This is driven by significant further
reductions in investment activity in the established markets,
especially in Europe, while sustained buoyant growth is expected
in the emerging economies.
Our Energy Sector is likewise benefiting in 2010 from
improved conditions in a number of markets mentioned for the
Industry Sector above. These include the chemical industry, the
post and logistics sector, the wholesale and retail sector,
transportation services, and the oil and gas industry. In
addition, the expected recovery in investment activities in the
utilities sector is having a positive impact in 2010. After a
decline of some 6% in 2009, IHS Global Insight forecasts an
increase of around 10% for the current year, driven in
particular by the encouraging development of Asias
emerging economies.
Gross capital expenditures within the international healthcare
markets, served by our Healthcare Sector, are expected to
increase by around 4% in 2010, following a decline of around 6%
in the year before. Once again, this growth is driven by
significant increases in capital expenditures in emerging
economies, while investments in some of our most significant
markets, such as the U.S. or Germany, are showing only
modest gains or continue to contract.
The public sector, a major customer of Siemens IT Solutions
and Services, is expected to increase its gross capital
investment by about 5%
year-on-year.
For financial services, another key sector for Siemens IT
Solutions and Services, gross capital expenditure is forecasted
to expand by around 6% in 2010.
Fiscal
2010 compared to fiscal 2009
Fiscal
2010Financial summary
In fiscal 2010, we emerged from the economic downturn as a more
focused company with strong operating momentum. Net income and
Total Sectors profit climbed above the prior-year levels, and
all three Sectors generated strong increases in Free cash flow
which resulted in a substantial increase in Free cash flow for
Siemens compared to the prior year. We also restored order
growth following the economic downturn, particularly in our
shorter-cycle businesses, and kept revenue almost level with the
prior year in part by steadily converting orders from our strong
order backlog into current business. Order development was
clearly more robust in the second half of fiscal 2010 than in
the first half, as our Sectors took advantage of improving
market conditions.
Among other portfolio activities during fiscal 2010, we launched
a strategic reorientation of our IT business aimed at improving
its competitive strength. Furthermore, we reassessed the growth
potential of the businesses we previously acquired to form our
Diagnostics Division. Both steps led to burdens on reported
income for the fiscal year. Charges for completion of staff
reduction measures resulted in a loss at Siemens IT Solutions
and Services, and a substantial goodwill impairment at
Diagnostics resulted in lower profit for the Healthcare Sector
compared to fiscal 2009.
We kept revenue stable
year-over-year.
At the Sector level, revenue was nearly unchanged compared to
fiscal 2009. Industry, our largest Sector by volume, offset
declines in its longer-cycle businesses with revenue growth in
faster-recovering, shorter-cycle businesses. Healthcare revenue
increased steadily throughout the year, and came in above the
prior-year level. Revenue at Energy was down in the first half
of the fiscal year, but recovered well in the second half. The
modest revenue decline for Siemens overall was due mainly to
lower revenue at Siemens IT Solutions and Services and
streamlining of Centrally managed portfolio activities. Revenue
in fiscal 2010 benefited from positive currency translation
effects. On a geographic basis, revenue rose 10% in Asia,
Australia. This offset much of the decline in revenue in the
much larger region Europe, C.I.S., Africa, and the
62
Middle East. Revenue in the Americas was nearly unchanged, as
double-digit growth in the regions emerging markets
largely offset a decrease in the U.S.
We restored order growth. The patterns described above
for revenue development in the Sectors were also evident in
order development. Industrys shorter-cycle businesses
delivered the majority of the Sectors order growth
year-over-year,
and Energys strong second half included high double-digit
growth in the fourth quarter compared to the prior-year quarter.
Healthcare orders rose steadily through the year. Order
development differed somewhat from revenue on a geographic
basis. Orders climbed 18% in the Americas, with both the
U.S. and emerging markets showing double-digit increases.
Asia, Australia saw solid order growth, and together these
regions offset lower orders in Europe, C.I.S., Africa, Middle
East.
We increased Total Sectors profit to
7.789 billion. The Sectors combined profit
came in 4% higher than the prior year, even after
1.204 billion in impairment charges at
Healthcares Diagnostics Division in the fourth quarter.
Industry took its profit up 29%
year-over-year,
as successful profitability initiatives improved capacity
utilization and reduced costs. Energy generated a 7% profit
increase compared to the prior fiscal year on strong project
execution. Profit at Healthcare was significantly lower due to
the impairment charges mentioned above.
During the fourth quarter of fiscal 2010 we completed a
strategic review that reassessed the medium-term growth
prospects and long-term market development of the laboratory
diagnostics business, and subsequently announced a preliminary
estimate of goodwill impairment charges. Following completion of
the annual impairment test, Diagnostics took impairment charges
at the close of the fourth quarter of 1.204 billion,
including 1.145 billion for goodwill, below the
previously announced estimate primarily due to currency
translation effects.
63
In fiscal 2010, Corporate items included expenses of
310 million related to special remuneration for
non-management employees. Once the allocation of the
remuneration is determined in the first quarter of fiscal 2011,
the expenses will be allocated primarily to the Sectors in
fiscal 2011.
Income from continuing operations rose substantially.
Total Sectors profit in fiscal 2010 came in higher despite the
above-mentioned impairment charges related to Healthcares
Diagnostics Division while burdens below the Sectors were lower
in the current fiscal year than in fiscal 2009. These factors
combined to increase income from continuing operations to
4.112 billion. Basic earnings per share (EPS) from
continuing operations rose to 4.54. A year earlier, income
from continuing operations was 2.457 billion and
basic EPS from continuing operations was 2.60. The
difference
year-over-year
was due mainly to Equity Investments, which had a loss of
191 million in fiscal 2010 compared to a loss of
1.851 billion in fiscal 2009. The loss in the
prior-year period included impairment charges related to NSN of
1.850 billion, primarily involving the
1.634 billion impairment of our stake in NSN. The
lower loss from Equity Investments in fiscal 2010 was partly
offset by a loss of 537 million (pre-tax) at Siemens
IT Solutions and Services, which posted a profit of
90 million (pre-tax) a year earlier. The loss in the
current period stemmed from a strategic reorientation aimed at
strengthening the competitive position of the business in
preparation for operating on a standalone basis, including
reorganization of solutions, outsourcing and software
activities. Completing previously announced staff reductions
occasioned charges of 399 million (pre-tax) in fiscal
2010, and we also took charges of 61 million
(pre-tax) within Corporate items, primarily relating to the
carve-out of Siemens IT Solutions and Services as a separate
legal entity which is a wholly owned consolidated subsidiary of
Siemens as of October 1, 2010. Net Income rose to
4.068 billion, up from 2.497 billion.
Basic EPS was 4.49 compared to 2.65 in fiscal 2009.
We generated substantial cash flow from continuing
operations. A strong cash performance in the Sectors,
particularly in the second half of the fiscal year, drove Free
cash flow from continuing operations up to
7.111 billion. Besides a strong operating performance
in the Sectors, cash flow from operating activities also
benefited from positive changes in net working capital including
substantially higher billings in excess of costs, particularly
in the Energy Sector, compared to a decrease in these payments
in fiscal 2009. In contrast, fiscal 2010 included higher cash
outflows related to income taxes and pension plans. For
comparison, negative changes in net working capital in fiscal
2009 included 1.008 billion in cash outflows for
payments to authorities in the U.S. and Germany following
resolution of legal proceedings, and substantial cash outflows
stemming from project charges at
64
Fossil Power Generation, Mobility and Siemens IT Solutions and
Services. The impairment charges at Diagnostics and NSN
mentioned above had no cash impact in the periods under review.
Free cash flow in both periods included approximately
0.8 billion in outflows related to staff reduction
measures.
We increased our capital efficiency. Return on capital
employed (ROCE) improved on a continuing basis to 10.4% from
6.1% in the prior year. The difference was due primarily to
higher income from continuing operations and, to a lesser
extent, to a decline in average capital employed
year-over-year.
ROCE in both fiscal years was held back by the burdens already
mentioned above for income from continuing operations. In the
current year, the pre-tax impairment charges of
1.204 billion at Diagnostics and the
460 million in pre-tax charges related to Siemens IT
Solutions and Services represented 3.6 percentage points of
ROCE, while the 1.850 billion in pre-tax impairment
charges related to NSN in the prior year represented
4.6 percentage points.
We propose to increase the dividend. The Siemens Managing
Board and Supervisory Board propose a dividend of 2.70 per
share. The prior-year dividend was 1.60 per share.
Results
of Siemens
The following discussion presents selected information for
Siemens for the fiscal year ended September 30, 2010:
Orders
and revenue
In fiscal 2010, revenue declined 1%
year-over-year,
to 75.978 billion, while orders rose 3% compared to
the prior-year period, to 81.163 billion. This
resulted in a
book-to-bill
ratio of 1.07. On an organic basis, excluding the net effect of
currency translation and portfolio transactions, revenue
decreased 3%, while orders came in 1% above fiscal 2009. Within
the full-year trend, the development of orders and revenue was
strongly influenced by the recovery in the global economy. While
order intake fell 15%
year-over-year
for the first six months, we reported order growth of 23% for
the second half of fiscal 2010 compared to the prior-year
period. Revenue development followed a similar pattern through
the year, though with less pronounced fluctuations due to the
stabilizing effect of our strong order backlog. The total order
backlog for our Sectors was 87 billion as of
September 30, 2010, up from
65
81 billion a year earlier, including positive
currency translation effects. Out of the current backlog, orders
of 39 billion are expected to be converted into
revenue during fiscal 2011, orders of 19 billion
during 2012, and the remainder in the periods thereafter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders (location of customer)
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
Year ended September 30,
|
|
|
vs. previous year
|
|
|
therein
|
|
|
|
2010
|
|
|
2009
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe,
C.I.S.(2),
Africa, Middle East
|
|
|
43,478
|
|
|
|
45,696
|
|
|
|
(5)%
|
|
|
|
(5)%
|
|
|
|
1%
|
|
|
|
(1)%
|
|
therein Germany
|
|
|
11,985
|
|
|
|
12,307
|
|
|
|
(3)%
|
|
|
|
(2)%
|
|
|
|
0%
|
|
|
|
0%
|
|
Americas
|
|
|
23,454
|
|
|
|
19,935
|
|
|
|
18%
|
|
|
|
15%
|
|
|
|
3%
|
|
|
|
0%
|
|
therein U.S.
|
|
|
16,640
|
|
|
|
14,691
|
|
|
|
13%
|
|
|
|
12%
|
|
|
|
2%
|
|
|
|
0%
|
|
Asia, Australia
|
|
|
14,231
|
|
|
|
13,360
|
|
|
|
7%
|
|
|
|
2%
|
|
|
|
5%
|
|
|
|
0%
|
|
therein China
|
|
|
5,599
|
|
|
|
5,525
|
|
|
|
1%
|
|
|
|
0%
|
|
|
|
2%
|
|
|
|
0%
|
|
therein India
|
|
|
2,368
|
|
|
|
2,309
|
|
|
|
3%
|
|
|
|
(2)%
|
|
|
|
4%
|
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Siemens
|
|
|
81,163
|
|
|
|
78,991
|
|
|
|
3%
|
|
|
|
1%
|
|
|
|
2%
|
|
|
|
(1)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
Commonwealth of Independent States.
|
Orders related to external customers increased 3% in
fiscal 2010 on higher demand in Industry and Healthcare, and
including positive currency translation effects in all Sectors.
The Industry Sectorour largest Sector by revenuesaw
orders rise 5% on growth in five of its six Divisions, led by
double-digit increases at Industry Automation and OSRAM. Orders
at Mobility came in lower
year-over-year,
due primarily to a lower volume from major orders. Order intake
in the Energy Sector came in level with the prior-year period,
as lower orders at Fossil Power Generation were offset by growth
in the other Divisions of the Sector, led by higher demand at
Renewable Energy. The order decline at Fossil Power Generation
was due primarily to a lower volume from major orders in the
first three quarters of fiscal 2010, a trend which reversed in
the fourth quarter. Order growth in the Healthcare Sector was
driven by strong order intake at Imaging & IT.
On a geographic basis, orders rose by double digits in the
Americas and also rose in Asia, Australia, more than offsetting
an order decline in Europe, C.I.S., Africa, Middle East. Order
development in emerging markets, as these markets are defined by
the International Monetary Fund, was consistent with the overall
order trend in each of our three reporting regions. In
Europe, C.I.S., Africa, Middle East our
largest reporting region by revenueorders fell 5%, largely
due to a decline in the Energy Sector, where orders were 11%
lower
year-over-year.
This was largely the result of a lower volume from major orders
at Fossil Power Generation. Healthcare orders remained stable in
the region and Industry orders came in 2% above the prior-year
period, as growth at Drive Technologies, Industry Automation and
OSRAM more than offset lower demand at other Divisions,
including a lower volume from major orders at Mobility. Large
prior-year contract wins at Mobility were the primary factor in
a 3% order decline for Siemens in Germany. In the
Americas, orders rose 18% on double-digit growth in all
Sectors. The largest increase was a 28% rise in the Energy
Sector, driven by a number of large onshore wind-farm orders at
Renewable Energy. Industry orders rose 15% in the region, with
contributions from all Divisions. Healthcare reported a 12%
order increase in the Americas, due primarily to strong demand
at Imaging & IT. Within the region, order growth in
the U.S. included a higher volume from major orders in all
Sectors. In Asia, Australia, order intake benefited from
positive currency translation effects and came in 7% higher
year-over-year,
despite significantly lower volume from major orders. Order
intake in the region rose by double digits in the Healthcare
Sector and to a lesser extent in Energy and Industry. The lower
volume from major orders mentioned above for the region limited
order growth in China and India. For comparison, the prior year
included a large contract win for high-speed trains in China and
major orders for Industry Solutions in India.
As previously disclosed, we have decided that, subject to the
exceptions outlined below, we will not enter into new contracts
with customers in Iran. Accordingly, we have issued group-wide
policies that establish the details of
66
our general decision. Under these policies, Siemens shall not
tender further bids for direct deliveries to customers in Iran.
Furthermore, indirect deliveries from Siemens to Iran via
external third parties, including companies in which Siemens
holds a minority stake, are generally prohibited unless an
exception is specifically approved under certain circumstances.
Notwithstanding the foregoing, products and services for
humanitarian purposes, including the products and services
supplied by our Healthcare Sector, and products and services
required to service the installed base (e.g., spare parts and
maintenance and assembly services) may still be provided under
the policies. Finally, pre-existing commitments to customers in
Iran may be honored, i.e., legally binding obligations resulting
from agreements that existed, or bids that were submitted,
before the aforementioned policies were announced and adopted.
Although, over time, we expect our business activities in Iran
to decline as a result of the implementation of the new policies
and the related reduction of the number of new contracts, the
actual development of our revenues in the future will largely
depend on the timing and scope of customer requests to fulfill
pre-existing commitments. For additional information, see
Item 3: Key informationRisk factors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (location of customer)
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
Year ended September 30,
|
|
|
vs. previous year
|
|
|
therein
|
|
|
|
2010
|
|
|
2009
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe,
C.I.S.(2),
Africa, Middle East
|
|
|
41,426
|
|
|
|
43,288
|
|
|
|
(4)%
|
|
|
|
(5)%
|
|
|
|
1%
|
|
|
|
(1)%
|
|
therein Germany
|
|
|
11,432
|
|
|
|
11,525
|
|
|
|
(1)%
|
|
|
|
(1)%
|
|
|
|
0%
|
|
|
|
0%
|
|
Americas
|
|
|
20,643
|
|
|
|
20,754
|
|
|
|
(1)%
|
|
|
|
(3)%
|
|
|
|
3%
|
|
|
|
0%
|
|
therein U.S.
|
|
|
14,772
|
|
|
|
15,684
|
|
|
|
(6)%
|
|
|
|
(6)%
|
|
|
|
1%
|
|
|
|
0%
|
|
Asia, Australia
|
|
|
13,909
|
|
|
|
12,609
|
|
|
|
10%
|
|
|
|
5%
|
|
|
|
5%
|
|
|
|
0%
|
|
therein China
|
|
|
5,841
|
|
|
|
5,218
|
|
|
|
12%
|
|
|
|
10%
|
|
|
|
2%
|
|
|
|
0%
|
|
therein India
|
|
|
1,961
|
|
|
|
1,680
|
|
|
|
17%
|
|
|
|
9%
|
|
|
|
7%
|
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Siemens
|
|
|
75,978
|
|
|
|
76,651
|
|
|
|
(1)%
|
|
|
|
(3)%
|
|
|
|
2%
|
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
Commonwealth of Independent States.
|
Revenue related to external customers declined 1% in
fiscal 2010, including a double-digit drop at Siemens IT
Solutions and Services. Sales in all Sectors benefited from
positive currency translation effects. Revenue in Industry came
in just below the prior-year level, including lower sales at
Industry Solutions and Drive Technologies. In contrast, revenue
at OSRAM rose by double digits
year-over-year.
Within a 1% decline in Energy, a double-digit increase in
revenue at Renewable Energy nearly offset declines in other
Divisions. Healthcare revenue came in 4% above the prior-year
level, including growth at all Divisions and a steady revenue
increase throughout the year. Below the Sectors, lower revenue
at Siemens IT Solutions and Services and portfolio streamlining
activities at Centrally managed portfolio activities were major
drivers of the overall revenue decline for Siemens.
Revenue from emerging markets rose 7%, to
23.142 billion, accounting for 30% of Siemens
overall revenue in fiscal 2010, compared to 28% in fiscal 2009.
On a geographic basis, growth in Asia, Australia was more than
offset by declines in other regions. In Europe, C.I.S.,
Africa, Middle East, revenue decreased 4%
year-over-year
due primarily to lower sales in the Industry Sector and at
Siemens IT Solutions and Services. Revenue in Industry decreased
6% in the region, as double-digit declines at Drive Technologies
and Industry Solutions more than offset strong growth at OSRAM.
Revenue for Energy and Healthcare came in near the level of the
prior fiscal year. In Germany, a double-digit revenue increase
in Energy was nearly offset by a revenue decline at Siemens IT
Solutions and Services. In the Americas, revenue fell 1%
year-over-year,
as lower sales in the U.S. were largely offset by
double-digit growth in the regions emerging markets. Among
the Sectors, revenue in the Americas slightly decreased in
Industry and came in level with the prior year in Energy and
Healthcare. Benefiting from positive currency translation
effects, revenue rose 10% in Asia, Australia in fiscal
2010 on double-digit growth in Industry and Healthcare. Revenue
came in higher at five of the Industry Sectors six
Divisions, and all Healthcare Divisions reported double-digit
revenue increases
67
year-over-year.
The Energy Sector recorded a revenue decline in the region.
Higher revenue in India included double-digit increases in all
Sectors.
Consolidated
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
September 30,
|
|
|
|
|
2010
|
|
2009
|
|
% Change
|
|
|
(in millions of )
|
|
|
|
Gross profit
|
|
|
21,647
|
|
|
|
20,710
|
|
|
|
5%
|
|
as percentage of revenue
|
|
|
28.5
|
%
|
|
|
27.0
|
%
|
|
|
|
|
Gross profit for fiscal 2010 came in 5% above the prior
year on higher gross profit margins in all Sectors. Even though
Industry and Energy recorded revenues slightly below the
prior-year level, both Sectors reported higher gross profits.
The increase in Industry included higher capacity utilization at
OSRAM, and to a lesser extent at Industry Automation, as well as
higher gross profit at Mobility. These factors more than offset
a significant gross profit decline at Industry Solutions, which
took 205 million in charges related to current cost
estimates for a project engagement with a local partner in the
U.S., and also saw a significant drop in revenue
year-over-year.
Gross profit in the Energy Sector rose on a more favorable
revenue mix and strong project performance, particularly at
Fossil Power Generation. The gross profit increase in the
Healthcare Sector was due in part to higher revenues and
included improved gross profits and margins in all Divisions. In
addition to a favorable product mix at Imaging & IT,
Healthcare benefited from positive effects related to currency
developments and from comparison with the prior-year period,
which included an unfavorable currency hedge and was burdened by
higher charges related to particle therapy contracts at
Workflow & Solutions. These charges were
96 million in the current year and
169 million a year earlier. Gross profit in all three
Sectors benefited from their respective portions of a previously
disclosed pension curtailment gain in the second quarter of
fiscal 2010. Further, gross profit was negatively influenced by
charges for staff reduction measures related to a strategic
reorientation of Siemens IT Solutions and Services, the majority
of which were recorded as Cost of goods sold and services
rendered. In addition, gross profit in fiscal 2010 included
201 million of the expenses related to the special
remuneration for non-management employees. The above factors,
together with savings related to our supply chain management
efforts, resulted in a gross profit margin of 28.5% for Siemens
overall, up from 27.0% in fiscal 2009.
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
|
(in millions of )
|
|
|
|
|
|
Research and development expenses
|
|
|
(3,846
|
)
|
|
|
(3,900
|
)
|
|
|
(1
|
)%
|
as percentage of revenue
|
|
|
5.1
|
%
|
|
|
5.1
|
%
|
|
|
|
|
Marketing, selling and general administrative expenses
|
|
|
(11,130
|
)
|
|
|
(10,896
|
)
|
|
|
2
|
%
|
as percentage of revenue
|
|
|
14.6
|
%
|
|
|
14.2
|
%
|
|
|
|
|
Other operating income
|
|
|
856
|
|
|
|
1,065
|
|
|
|
(20
|
)%
|
Other operating expense
|
|
|
(1,611
|
)
|
|
|
(632
|
)
|
|
|
155
|
%
|
Loss from investments accounted for using the equity method, net
|
|
|
(40
|
)
|
|
|
(1,946
|
)
|
|
|
(98
|
)%
|
Interest income
|
|
|
2,161
|
|
|
|
2,136
|
|
|
|
1
|
%
|
Interest expense
|
|
|
(1,890
|
)
|
|
|
(2,213
|
)
|
|
|
(15
|
)%
|
Other financial income (expense), net
|
|
|
(336
|
)
|
|
|
(433
|
)
|
|
|
(22
|
)%
|
Research and development (R&D) expenses decreased
slightly, to 3.846 billion, due primarily to lower
expenses in the Industry Sector. R&D expenses as a
percentage of revenue remained at the prior-year level of 5.1%.
Marketing, selling and general administrative (SG&A)
expenses rose slightly to 11.130 billion or 14.6%
of revenues in fiscal 2010, from 10.896 billion or
14.2% of revenues a year earlier. The increase was due primarily
to higher expenses in the Energy Sector associated with growth
in the second half of fiscal 2010, and to the above-mentioned
charges at Siemens IT Solutions and Services, a portion of which
was recorded as SG&A expense. SG&A expenses in fiscal
2010 also included a portion of the expenses related to the
special remuneration for non-management employees.
Other operating income was 856 million in
fiscal 2010. The current period included higher gains in
connection with compliance-related matters, including a gain of
84 million related to an agreement with the provider
of the Siemens directors and officers liability insurance,
a net gain related to settlements with former members of
Siemens Managing Board and Supervisory Board, and total
gains of 40 million related to the recovery of funds
frozen by authorities. In addition, the current period included
a gain of 47 million on the sale of the Mobility
Divisions airfield lighting business, and a gain of
35 million from the sale of our Roke Manor activities
in the U.K. that were reported in Corporate items. Further,
Siemens ceased to consolidate a subsidiary in the third quarter
of fiscal 2010 due to loss of control, and recorded a related
gain of 40 million. For comparison, Other operating
income of 1.065 billion in the prior-year period
included a gain of 327 million on the sale of our
stake in Fujitsu Siemens Computers (Holding) B.V. (FSC); higher
gains related to the disposal of real estate, most notably a
gain of 224 million from the sale of Siemens
residential real estate holdings; and income related to legal
and regulatory matters.
Other operating expense increased substantially in fiscal
2010, to 1.611 billion, compared to
632 million a year earlier. The difference was due
primarily to impairment charges at the Diagnostics Division in
the fourth quarter of fiscal 2010, including
1.145 billion for goodwill and 39 million
for real estate. In addition, the current period included
106 million provided for in connection with an
expected loss from the announced sale of our electronics
assembly systems business, held in Centrally managed portfolio
activities, to ASM Pacific Technology. Further, fiscal 2010
included charges related to legal and regulatory matters. For
comparison, the prior year included expenses for outside
advisors engaged in connection with investigations into alleged
violations of anti-corruption laws and related matters as well
as remediation activities, which amounted to
95 million. Fiscal 2009 also included a charge of
53 million related to a global settlement agreement
with the World Bank Group and expenses related to the divestment
of an industrial manufacturing unit in Austria, which was held
in Centrally managed portfolio activities. Further, the prior
fiscal year included valuation allowances on loans.
Income from investments accounted for using the equity
method, net was a negative 40 million, compared
to a negative 1.946 billion in fiscal 2009. The
difference was due primarily to an equity investment loss of
2.177 billion in the prior year related to NSN. This
equity investment loss included an impairment of
1.634 billion on our stake in NSN recorded in the
fourth quarter and a loss of 543 million, including a
charge of 216 million related to an impairment of
deferred tax assets at NSN as well as our share of restructuring
and integration costs. In addition, the prior year included an
equity investment loss of 171 million related to
Enterprise
69
Networks Holdings B.V. (EN). For comparison, Income from
investments accounted for using the equity method, net in fiscal
2010 included an investment loss of 533 million
related to NSN. Further, equity investment income related to our
stakes in BSH and KMW improved to a total of
277 million in fiscal 2010 from a total of
195 million a year earlier.
Interest income increased slightly to
2.161 billion in fiscal 2010, from
2.136 billion a year earlier. Interest expense
was 1.890 billion, down from
2.213 billion in fiscal 2009. The decline in interest
expense was due in part to lower interest rates compared to the
prior year.
Other financial income (expense), net was a negative
336 million in fiscal 2010 compared to a negative
433 million in the prior-year period. The difference
was due primarily to higher expenses in fiscal 2009 as a result
of allowances and write-offs of finance receivables, net of
reversals. These net expenses amounted to 63 million
in fiscal 2010, compared to 162 million a year
earlier. In addition, fiscal 2010 included higher income from
available-for-sale
financial assets, including a gain of 47 million from
the sale of a stake in an investment at SFS. These factors were
partly offset by higher losses
year-over-year
related to interest rate derivatives not qualifying for hedge
accounting.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
|
(in millions of )
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
5,811
|
|
|
|
3,891
|
|
|
|
49
|
%
|
Income taxes
|
|
|
(1,699
|
)
|
|
|
(1,434
|
)
|
|
|
18
|
%
|
as percentage of income from continuing operations before
income taxes
|
|
|
29
|
%
|
|
|
37
|
%
|
|
|
|
|
Income from continuing operations
|
|
|
4,112
|
|
|
|
2,457
|
|
|
|
67
|
%
|
Income (loss) from discontinued operations, net of income taxes
|
|
|
(44
|
)
|
|
|
40
|
|
|
|
|
|
Net income
|
|
|
4,068
|
|
|
|
2,497
|
|
|
|
63
|
%
|
Net income attributable to non-controlling interests
|
|
|
169
|
|
|
|
205
|
|
|
|
|
|
Net income attributable to shareholders of Siemens AG
|
|
|
3,899
|
|
|
|
2,292
|
|
|
|
70
|
%
|
Income from continuing operations before income taxes was
5.811 billion for the current fiscal year, compared
to 3.891 billion a year earlier. The improvement
year-over-year
was due to the factors mentioned above, primarily including
higher gross profit in all Sectors and an improved financial
result in fiscal 2010, partly offset by charges related to the
strategic reorientation of Siemens IT Solutions and Services.
While both periods included major impairments as noted above,
the impact on income from continuing operations was lower in
fiscal 2010. The effective tax rate was 29% in fiscal 2010, down
from 37% in the prior year. The current-year rate was adversely
affected by the goodwill impairment charges at the Diagnostics
Division, a majority of which was not deductible for tax
purposes. This effect was more than offset by the release of tax
provisions after the conclusion of tax audits, and the release
of tax liabilities after the positive decision on appeal related
to non-deductible expenses in connection with certain foreign
dividends. For comparison, the prior-year rate was adversely
affected by the significant Loss from investments accounted for
using the equity method, net, primarily due to NSN, partly
offset by the tax-free gain on the sale of our stake in FSC. As
a result, Income from continuing operations after taxes was
4.112 billion in fiscal 2010, up from
2.457 billion in the prior-year period.
70
Discontinued operations primarily include former Com
activities, comprising telecommunications carrier activities
transferred into NSN in the third quarter of fiscal 2007; the
enterprise networks business, 51% of which was divested during
the fourth quarter of fiscal 2008; and the mobile devices
business sold to BenQ Corporation in fiscal 2005. Income from
discontinued operations in fiscal 2010 was a negative
44 million, including charges related to legal and
regulatory matters, compared to a positive 40 million
a year earlier. For additional information regarding
discontinued operations, see Notes to Consolidated
Financial Statements.
Net income for Siemens in fiscal 2010 was
4.068 billion compared to 2.497 billion a
year earlier. Net income attributable to shareholders of Siemens
AG was 3.899 billion, up from
2.292 billion in fiscal 2009.
Segment
information analysis
Sectors
Industry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
3,478
|
|
|
|
|
2,701
|
|
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit margin
|
|
|
10.0
|
|
%
|
|
|
7.7
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New orders
|
|
|
34,908
|
|
|
|
|
33,284
|
|
|
|
|
5
|
%
|
|
|
3
|
%
|
|
|
2
|
|
%
|
|
|
(1)
|
%
|
Total revenue
|
|
|
34,869
|
|
|
|
|
35,043
|
|
|
|
|
0
|
%
|
|
|
(2)
|
%
|
|
|
2
|
|
%
|
|
|
(1)
|
%
|
External revenue
|
|
|
33,728
|
|
|
|
|
33,915
|
|
|
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
therein:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe,
C.I.S.(2),
Africa, Middle East
|
|
|
18,127
|
|
|
|
|
19,243
|
|
|
|
|
(6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
therein Germany
|
|
|
6,652
|
|
|
|
|
6,636
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
8,215
|
|
|
|
|
8,323
|
|
|
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia, Australia
|
|
|
7,386
|
|
|
|
|
6,349
|
|
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
Commonwealth of Independent States.
|
The Industry Sector increased its profit 29%
year-over-year,
to 3.478 billion, as successful profitability
initiatives resulted in improved capacity utilization and cost
management. These factors were particularly evident in the
Sectors shorter-cycle businesses, which began recovering
from the downturn in the first half of the fiscal year. All
Divisions except Industry Solutions produced higher profit
year-over-year,
with the strongest increases coming at OSRAM and Industry
Automation. A number of factors burdened Sector profit in both
periods. The current period includes 200 million in
charges for staff reduction measures, 205 million in
charges related to current cost estimates for a project
engagement with a local partner in the U.S., and a provision for
a supplier-related warranty. These factors were only partly
offset by 76 million in gains related to curtailment
of pension plans in the U.S., which benefited results at all
Divisions, and a 47 million net gain at Mobility on
the sale of its airfield lighting business. Profit in fiscal
2009 was held back by 173 million in charges for
staff reduction measures in the fourth quarter and by charges of
40 million at OSRAM for major impairments and
inventory write-downs.
Revenue in Industry came in level
year-over-year.
While the recovery in shorter-cycle business mentioned above
helped lift revenues for OSRAM and Industry Automation, market
conditions for the Sectors longer-cycle businesses showed
signs of stabilization later in the fiscal year. On a regional
basis, double-digit growth in Asia, Australia offset lower
revenue in Europe, C.I.S., Africa, Middle East. Orders rose 5%
compared to the prior fiscal year on increases at all Divisions
except Mobility, which saw lower volume from major orders. The
improvement was due to higher demand in the Americas, as orders
in other regions came in almost level with the prior year.
Industrys order backlog was 28 billion at the
end of fiscal 2010, unchanged from a year earlier. Out of the
current
71
backlog, orders of 14 billion are expected to be
converted into revenue during fiscal 2011, orders of
7 billion during fiscal 2012, and the remainder in
the periods thereafter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
2009
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
Automation(2)(3)
|
|
|
6,421
|
|
|
|
5,571
|
|
|
|
15
|
%
|
|
|
13
|
%
|
|
|
2%
|
|
|
|
0
|
%
|
Drive Technologies
|
|
|
6,981
|
|
|
|
6,511
|
|
|
|
7
|
%
|
|
|
5
|
%
|
|
|
2%
|
|
|
|
0
|
%
|
Building
Technologies(2)
|
|
|
7,132
|
|
|
|
6,910
|
|
|
|
3
|
%
|
|
|
1
|
%
|
|
|
3%
|
|
|
|
0
|
%
|
OSRAM
|
|
|
4,681
|
|
|
|
4,036
|
|
|
|
16
|
%
|
|
|
14
|
%
|
|
|
3%
|
|
|
|
(1
|
)%
|
Industry Solutions
|
|
|
6,203
|
|
|
|
6,101
|
|
|
|
2
|
%
|
|
|
(1
|
)%
|
|
|
3%
|
|
|
|
0
|
%
|
Mobility
|
|
|
5,885
|
|
|
|
6,766
|
|
|
|
(13
|
)%
|
|
|
(14
|
)%
|
|
|
2%
|
|
|
|
(1
|
)%
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
At the beginning of fiscal 2010,
the low-voltage switchgear business was transferred from
Industry Automation to Building Technologies. Prior-year amounts
were reclassified for comparison purposes.
|
|
(3)
|
At the beginning of fiscal 2010, a
production site was transferred from Industry Automation to
Drive Technologies. Prior-year amounts were reclassified for
comparison purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
2009
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
Automation(2)(3)
|
|
|
6,226
|
|
|
|
5,763
|
|
|
|
8
|
%
|
|
|
6
|
%
|
|
|
2
|
%
|
|
|
0
|
%
|
Drive Technologies
|
|
|
6,960
|
|
|
|
7,526
|
|
|
|
(8
|
)%
|
|
|
(9
|
)%
|
|
|
2
|
%
|
|
|
0
|
%
|
Building
Technologies(2)
|
|
|
6,903
|
|
|
|
7,007
|
|
|
|
(1
|
)%
|
|
|
(3
|
)%
|
|
|
2
|
%
|
|
|
0
|
%
|
OSRAM
|
|
|
4,681
|
|
|
|
4,036
|
|
|
|
16
|
%
|
|
|
14
|
%
|
|
|
3
|
%
|
|
|
(1
|
)%
|
Industry Solutions
|
|
|
6,040
|
|
|
|
6,804
|
|
|
|
(11
|
)%
|
|
|
(13
|
)%
|
|
|
2
|
%
|
|
|
0
|
%
|
Mobility
|
|
|
6,508
|
|
|
|
6,442
|
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
(2
|
)%
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
At the beginning of fiscal 2010,
the low-voltage switchgear business was transferred from
Industry Automation to Building Technologies. Prior-year amounts
were reclassified for comparison purposes.
|
|
(3)
|
At the beginning of fiscal 2010, a
production site was transferred from Industry Automation to
Drive Technologies. Prior-year amounts were reclassified for
comparison purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
Profit margin
|
|
|
|
Year ended
|
|
|
|
|
|
Year ended
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industry
Automation(1)
|
|
|
1,048
|
|
|
|
681
|
|
|
|
54
|
%
|
|
|
16.8
|
%
|
|
|
11.8%
|
|
Drive Technologies
|
|
|
855
|
|
|
|
836
|
|
|
|
2
|
%
|
|
|
12.3
|
%
|
|
|
11.1%
|
|
Building
Technologies(1)
|
|
|
456
|
|
|
|
340
|
|
|
|
34
|
%
|
|
|
6.6
|
%
|
|
|
4.9%
|
|
OSRAM
|
|
|
569
|
|
|
|
89
|
|
|
|
>200
|
%
|
|
|
12.2
|
%
|
|
|
2.2%
|
|
Industry Solutions
|
|
|
39
|
|
|
|
360
|
|
|
|
(89
|
)%
|
|
|
0.7
|
%
|
|
|
5.3%
|
|
Mobility
|
|
|
513
|
|
|
|
390
|
|
|
|
32
|
%
|
|
|
7.9
|
%
|
|
|
6.1%
|
|
|
|
(1)
|
At the beginning of fiscal 2010,
the low-voltage switchgear business was transferred from
Industry Automation to Building Technologies. Prior-year amounts
were reclassified for comparison purposes.
|
72
Profit at Industry Automation increased 54%
year-over-year
on an improved business mix, higher capacity utilization and
measures to improve profitability. The Division took
25 million in charges for staff reduction measures,
compared to net charges of 22 million in the fourth
quarter of fiscal 2009. Profit in the current period benefited
from a 19 million gain from the sale of a business.
Both fiscal years under review included purchase price
allocation (PPA) effects from the acquisition of UGS Corp.,
acquired in fiscal 2007. PPA effects were 142 million
in fiscal 2010 and 138 million a year earlier.
Revenue and orders both grew
year-over-year,
in part due to a restoration of customer demand in the factory
automation markets, including short-term restocking effects.
Orders grew in all three regions, led by Asia, Australia.
Revenue grew strongly in Asia, Australia while revenue in other
regions remained stable
year-over-year.
Profit at Drive Technologies improved quarter by quarter
throughout the fiscal year, and came in at 855 million for
the full year. Charges for staff reduction measures were
37 million compared to charges of
30 million in the fourth quarter of fiscal 2009. The
increase in profit
year-over-year
was driven by the Divisions shorter-cycle businesses,
which saw steady recovery of their markets during the year
following a sharp downturn in fiscal 2009. This trend included
strong demand from the machine-building industry. In contrast,
the Divisions longer-cycle businesses did not see signs of
more stable market conditions until late in fiscal 2010. Revenue
was lower
year-over-year
notably including a decline in Europe, C.I.S., Africa, Middle
East. Orders increased 7%
year-over-year,
driven by the improvement
year-over-year
in shorter-cycle businesses.
Building Technologies contributed 456 million
to Sector profit in fiscal 2010. The sharp increase compared to
fiscal 2009 included a strong performance in control products
and systems and a turn-around in the low voltage distribution
business. Charges for staff reduction measures were
24 million in the current fiscal year compared to
29 million in the fourth quarter of fiscal 2009. The
provision for a supplier-related warranty mentioned above was
largely offset by the Divisions portion of the pension
curtailment gain, also mentioned above. Revenue came in 1% lower
than a year earlier, as higher revenue in Asia, Australia was
more than offset by lower revenue in other regions. Orders rose
3% on higher demand in Asia, Australia and the Americas.
Results at OSRAM improved more substantially
year-over-year
than at other Divisions within Industry, as the successful
implementation of structural initiatives coincided with a
significant improvement in market conditions. As a result,
profit climbed to 569 million on higher revenues,
increased capacity utilization and an improved business mix as
well as an improved cost structure. Profit in the current period
benefited from 23 million of the pension gain
mentioned above, while profit in the prior fiscal year was
burdened by 18 million in charges for staff reduction
measures as well as 40 million for major impairments
and inventory write-downs taken in the fourth quarter.
Double-digit volume growth included strong demand for
OSRAMs LED and automotive solutions. The Division intends
to continue investing in market expansion and production
capacity in coming quarters.
Industry Solutions reported profit of
39 million in fiscal 2010, well below the prior-year
level. The Division took 205 million in charges
related to current cost estimates for a project engagement with
a local partner in the U.S. mentioned above. Furthermore,
charges for staff reduction measures were higher, totaling
101 million in the current period compared to
69 million in fiscal 2009. To a lesser extent, profit
also fell on lower capacity utilization. Revenue declined 11%
year-over-year,
due primarily to a sharp drop
year-over-year
at the Divisions large metal technologies business. A high
double-digit increase in order intake in the fourth quarter in
the Americas and Europe, C.I.S., Africa, Middle East lifted
full-year orders above the prior-year level.
Mobility contributed 513 million to Sector
profit in fiscal 2010, well above the prior-year level due in
part to selective order intake in prior periods as well as
execution of programs to improve performance in its project
business. Profit benefited from the 47 million gain
from the sale of the Divisions airfield lighting business
and the Divisions portion of the pension curtailment gain,
both mentioned above. Revenue for Mobility was stable
year-over-year,
as growth in Asia, Australia offset declines in other regions.
Orders came in lower compared to the prior-year, when a higher
volume from major orders included a particularly large train
order in China.
73
Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
3,562
|
|
|
|
|
3,315
|
|
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit margin
|
|
|
14.0
|
|
%
|
|
|
12.9
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New orders
|
|
|
30,122
|
|
|
|
|
30,076
|
|
|
|
|
0
|
%
|
|
|
(2)
|
%
|
|
|
2
|
|
%
|
|
|
0
|
%
|
Total revenue
|
|
|
25,520
|
|
|
|
|
25,793
|
|
|
|
|
(1)
|
%
|
|
|
(4)
|
%
|
|
|
2
|
|
%
|
|
|
0
|
%
|
External revenue
|
|
|
25,204
|
|
|
|
|
25,405
|
|
|
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
therein:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe,
C.I.S.(2),
Africa, Middle East
|
|
|
14,800
|
|
|
|
|
14,715
|
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
therein Germany
|
|
|
2,118
|
|
|
|
|
1,905
|
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
6,558
|
|
|
|
|
6,552
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia, Australia
|
|
|
3,847
|
|
|
|
|
4,138
|
|
|
|
|
(7)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
Commonwealth of Independent States.
|
The Energy Sector executed particularly well in fiscal
2010, increasing Sector profit 7%
year-over-year,
to 3.562 billion, despite a slight decline in
full-year revenue compared to fiscal 2009 and increased expenses
for R&D, marketing and selling associated with growth in
the second half of fiscal 2010. Profit growth came primarily
from Fossil Power Generation, due mainly to strong project
execution and a more favorable revenue mix, and to a lesser
extent from Power Transmission. The Sectors other
Divisions each posted a modest profit decline
year-over-year.
Market conditions for Energy were difficult in the first half of
the current fiscal year, as customer postponements of large
infrastructure projects that began in fiscal 2009 continued into
fiscal 2010. Conditions improved in the second half,
particularly including a strong
pick-up in
major orders. As a result, fiscal 2010 orders for the Sector
came in just above the prior-year level, at
30.122 billion. Orders climbed at all Divisions
except Fossil Power Generation, which saw significantly lower
volume from major orders in the first three quarters of the
fiscal year. On a geographic basis, higher orders in the
Americas and Asia, Australia offset lower demand in Europe,
C.I.S., Africa, Middle East. Revenue of
25.520 billion was 1% lower than the fiscal 2009
level, as a double-digit increase in revenue at Renewable Energy
nearly offset declines in the other Divisions. On a geographic
basis, revenue was up slightly in Europe, C.I.S., Africa, Middle
East, level in the Americas and lower in Asia, Australia. On a
book-to-bill
ratio of 1.18, the Sectors order backlog rose to
53 billion at the end of fiscal 2010, up from
47 billion a year earlier. Out of the current
backlog, orders of 21 billion are expected to be
converted into revenue during fiscal 2011, orders of
11 billion during 2012, and the remainder in the
periods thereafter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fossil Power Generation
|
|
|
9,920
|
|
|
|
|
12,135
|
|
|
|
|
(18)
|
%
|
|
|
(20)
|
%
|
|
|
2
|
|
%
|
|
|
0
|
%
|
Renewable Energy
|
|
|
5,929
|
|
|
|
|
4,823
|
|
|
|
|
23
|
%
|
|
|
22
|
%
|
|
|
1
|
|
%
|
|
|
0
|
%
|
Oil & Gas
|
|
|
4,943
|
|
|
|
|
4,450
|
|
|
|
|
11
|
%
|
|
|
7
|
%
|
|
|
4
|
|
%
|
|
|
0
|
%
|
Power Transmission
|
|
|
6,770
|
|
|
|
|
6,324
|
|
|
|
|
7
|
%
|
|
|
5
|
%
|
|
|
2
|
|
%
|
|
|
0
|
%
|
Power Distribution
|
|
|
3,231
|
|
|
|
|
3,018
|
|
|
|
|
7
|
%
|
|
|
4
|
%
|
|
|
3
|
|
%
|
|
|
0
|
%
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fossil Power Generation
|
|
|
9,550
|
|
|
|
|
9,802
|
|
|
|
|
(3)
|
%
|
|
|
(3)
|
%
|
|
|
1
|
|
%
|
|
|
0
|
%
|
Renewable Energy
|
|
|
3,272
|
|
|
|
|
2,935
|
|
|
|
|
11
|
%
|
|
|
5
|
%
|
|
|
3
|
|
%
|
|
|
3
|
%
|
Oil & Gas
|
|
|
4,156
|
|
|
|
|
4,276
|
|
|
|
|
(3)
|
%
|
|
|
(6)
|
%
|
|
|
4
|
|
%
|
|
|
0
|
%
|
Power Transmission
|
|
|
6,143
|
|
|
|
|
6,172
|
|
|
|
|
0
|
%
|
|
|
(4)
|
%
|
|
|
3
|
|
%
|
|
|
0
|
%
|
Power Distribution
|
|
|
3,039
|
|
|
|
|
3,284
|
|
|
|
|
(7)
|
%
|
|
|
(10)
|
%
|
|
|
3
|
|
%
|
|
|
0
|
%
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
Profit margin
|
|
|
|
Year ended
|
|
|
|
|
|
Year ended
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fossil Power Generation
|
|
|
1,516
|
|
|
|
1,275
|
|
|
|
19
|
%
|
|
|
15.9
|
%
|
|
|
13.0
|
%
|
Renewable Energy
|
|
|
368
|
|
|
|
382
|
|
|
|
(4
|
)%
|
|
|
11.3
|
%
|
|
|
13.0
|
%
|
Oil & Gas
|
|
|
487
|
|
|
|
499
|
|
|
|
(2
|
)%
|
|
|
11.7
|
%
|
|
|
11.7
|
%
|
Power Transmission
|
|
|
763
|
|
|
|
725
|
|
|
|
5
|
%
|
|
|
12.4
|
%
|
|
|
11.7
|
%
|
Power Distribution
|
|
|
422
|
|
|
|
435
|
|
|
|
(3
|
)%
|
|
|
13.9
|
%
|
|
|
13.2
|
%
|
Fossil Power Generation again led all Siemens Divisions
with 1.516 billion in profit in fiscal 2010. Drivers
of the 19% increase
year-over-year
included strong project execution and a more favorable revenue
mix, including a higher contribution from the service business.
Charges of 57 million for capacity adjustments
related to a shift of production capacity within the Americas
region were partly offset by the Divisions share in the
pension curtailment gain. Order development at Fossil Power
Generation was heavily influenced by market contraction in the
first three quarters of the fiscal year, including the drop in
major orders mentioned above. Strong demand in the fourth
quarter limited the Divisions order decline to 18% for the
full year. In contrast, revenue development throughout the year
remained relatively stable due to Fossil Power Generations
strong order backlog, and revenue came in 3% below the
prior-year period.
Profit at Renewable Energy declined 4% compared to fiscal
2009, to 368 million, after significant expenses and
investments to expand the Divisions wind business and
build up its solar business, including transaction and
integration costs related to consolidation of the solar company
Solel. These transaction and integration costs, in combination
with negative operating results, resulted in a net loss related
to the acquired Solel business in fiscal 2010. After a
seasonally low first quarter, revenue rose in each of the next
three quarters, both
year-over-year
and on a consecutive basis, resulting in an 11% increase for the
full year. As in past years, order development was more volatile
from quarter to quarter than revenue growth. The Division
continued to win large wind-farm orders in Europe and the
Americas and generated a 23% increase in new orders for the full
fiscal year. Renewable Energy expects impacts on profitability
in the first half of fiscal 2011 related to the
build-up of
its solar business and seasonal effects in the wind business.
Profit at Oil & Gas came in 2% lower
year-over-year,
at 487 million. The main factor in the change was a
3% decline in revenue coming primarily from the Divisions
compression and solutions business. Orders rose steadily
throughout the fiscal year and came in 11% higher
year-over-year,
including strong demand at the industrial turbines business.
Power Transmission recorded a 5% increase in profit, to
763 million. While profit was held back in part by
pricing pressure due mainly to new market entrants, the Division
benefited from a positive swing in effects from commodity
hedging and also improved its project performance compared to
the prior year. Starting from a relatively low level in the
first quarter of fiscal 2010, the Division increased its revenue
steadily throughout the year. Due to a particularly strong
fourth quarter in the transformers business, full-year revenue
came in just below the prior-year
75
level. Orders at Power Transmission rose 7% compared to the
prior fiscal year, due to a higher volume from major orders,
including large contracts for grid access to off-shore
wind-farms.
Profit at Power Distribution was 422 million,
down 3% from the prior-year level, due mainly to a 7% decline in
revenue. Both results were driven by the Divisions medium
voltage business, which saw double-digit percentage drops in
revenue and profit compared to fiscal 2009. Orders for the
Division were up 7%
year-over-year,
due to a strong fourth quarter that more than offset weaker
demand earlier in the fiscal year.
Healthcare
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sector
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
748
|
|
|
|
|
1,450
|
|
|
|
|
(48)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit margin
|
|
|
6.1
|
|
%
|
|
|
12.2
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New orders
|
|
|
12,872
|
|
|
|
|
11,950
|
|
|
|
|
8
|
%
|
|
|
5
|
%
|
|
|
3
|
|
%
|
|
|
0
|
%
|
Total revenue
|
|
|
12,364
|
|
|
|
|
11,927
|
|
|
|
|
4
|
%
|
|
|
1
|
%
|
|
|
3
|
|
%
|
|
|
0
|
%
|
External revenue
|
|
|
12,280
|
|
|
|
|
11,864
|
|
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
therein:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe,
C.I.S.(2),
Africa, Middle East
|
|
|
4,680
|
|
|
|
|
4,724
|
|
|
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
therein Germany
|
|
|
1,056
|
|
|
|
|
1,072
|
|
|
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
5,141
|
|
|
|
|
5,153
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia, Australia
|
|
|
2,459
|
|
|
|
|
1,986
|
|
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
Commonwealth of Independent States.
|
Conditions in the global healthcare market improved in fiscal
2010, particularly including significant increases in healthcare
equipment spending in emerging markets. In addition, passage of
healthcare reform legislation in the U.S. removed some
uncertainty in the market and contributed to an easing of
customer restraint regarding capital expenditures.
In fiscal 2010, orders for the Healthcare Sector came in
8% higher compared to the prior fiscal year. The Sector recorded
higher orders for Imaging & IT and Diagnostics in the
Americas, particularly including the U.S., and in Asia,
Australia. Revenue in fiscal 2010 increased 4% compared to
fiscal 2009, particularly on a double-digit increase for all
Divisions in Asia, Australia. Both orders and revenue were
stable in Europe, C.I.S., Africa, Middle East. On an organic
basis, excluding strong positive currency translation effects,
orders came in 5% higher and revenue rose 1% compared to fiscal
2009. Healthcares
book-to-bill
ratio was 1.04 for fiscal 2010, and its order backlog at the end
of the year stood at 7 billion compared to
6 billion a year earlier. Of the Sectors
current backlog, orders of 3.5 billion are expected
to be converted into revenue during fiscal 2011, orders of
1.3 billion during fiscal 2012, and the remainder in
the periods thereafter.
Sector profit of 748 million in fiscal 2010 was
burdened by impairment charges of 1.204 billion at
Diagnostics during the fourth quarter, including a goodwill
impairment. These impairments more than offset positive effects
during the year. These included a gain of 79 million
related to the curtailment of pension plans in the U.S. and
a gain of 40 million, taken at the Sector level, as
the Sector ceased to consolidate a subsidiary due to loss of
control. The change in profit
year-over-year
included positive effects related to currency development,
notably an unfavorable currency hedge in the prior year. Both
years under review include charges at Workflow &
Solutions related to particle therapy contracts. In fiscal 2010,
Diagnostics recorded 178 million in PPA effects
related to past acquisitions. A year earlier Diagnostics
recorded a total of 248 million in PPA and
integration costs. In fiscal 2010, the Sector recorded
90 million in costs for integrating activities at
Diagnostics.
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
2009
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imaging & IT
|
|
|
7,961
|
|
|
|
7,143
|
|
|
|
11
|
%
|
|
|
9
|
%
|
|
|
3%
|
|
|
|
0%
|
|
Workflow & Solutions
|
|
|
1,498
|
|
|
|
1,553
|
|
|
|
(4
|
)%
|
|
|
(6
|
)%
|
|
|
3%
|
|
|
|
0%
|
|
Diagnostics
|
|
|
3,664
|
|
|
|
3,479
|
|
|
|
5
|
%
|
|
|
3
|
%
|
|
|
3%
|
|
|
|
0%
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
2009
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imaging & IT
|
|
|
7,419
|
|
|
|
7,152
|
|
|
|
4
|
%
|
|
|
2
|
%
|
|
|
2%
|
|
|
|
0%
|
|
Workflow & Solutions
|
|
|
1,522
|
|
|
|
1,515
|
|
|
|
0
|
%
|
|
|
(2
|
)%
|
|
|
2%
|
|
|
|
0%
|
|
Diagnostics
|
|
|
3,667
|
|
|
|
3,490
|
|
|
|
5
|
%
|
|
|
2
|
%
|
|
|
3%
|
|
|
|
0%
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
Profit margin
|
|
|
|
Year ended
|
|
|
|
|
|
Year ended
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
Divisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imaging & IT
|
|
|
1,452
|
|
|
|
1,161
|
|
|
|
25
|
%
|
|
|
19.6
|
%
|
|
|
16.2
|
%
|
Workflow & Solutions
|
|
|
27
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
1.8
|
%
|
|
|
(3.5
|
)%
|
Diagnostics
|
|
|
(776
|
)
|
|
|
338
|
|
|
|
|
|
|
|
(21.2
|
)%
|
|
|
9.7
|
%
|
Profit at Imaging & IT increased 25% to
1.452 billion in the prior year, on higher revenue, a
favorable product mix and continued cost savings. The increase
in profit
year-over-year
benefited from positive effects related to currency development,
including an unfavorable currency hedge in the prior year. In
addition, profit in the current period benefited from
44 million of the pension gain mentioned above for
the Sector. Orders climbed 11%
year-over-year
and revenue increased 4%. As for the whole Sector, orders at
Imaging & IT showed strong growth in the Americas and
Asia, Australia, while orders at Europe, C.I.S., Africa, Middle
East remained stable. Double-digit revenue growth in Asia,
Australia included strong increases in Japan, China and India.
On an organic basis, orders climbed 9% and revenue rose 2%.
Workflow & Solutions generated
27 million in profit compared to a loss of
53 million a year earlier. Both periods under review
included charges associated with particle therapy contracts
mentioned above, totaling 96 million in fiscal 2010
and 169 million in fiscal 2009. The charges stemmed
from tests of prototype technology, resulting in a revised
assessment of the additional costs required to complete the
projects. Orders in fiscal 2010 came in 4% below the prior-year
level. Revenue was stable
year-over-year.
Diagnostics posted a loss of 776 million in
fiscal 2010 compared to profit of 338 million a year
earlier, due primarily to the impairment charges mentioned
above. During the fourth quarter, Siemens completed a strategic
review which reassessed the medium-term growth prospects and
long-term market development of the laboratory diagnostics
business, and also conducted correspondingly an annual
impairment test. The impairment charges of
1.204 billion included 1.145 billion for
goodwill and 39 million for real estate. For further
information regarding goodwill at Diagnostics, refer to
Net Assets Position and see also Notes to
Consolidated Financial Statements. The Division recorded
lower expenses related to SG&A, and results also benefited
from 22 million of the pension curtailment gain
mentioned above. PPA effects related to past acquisitions were
178 million in fiscal 2010. In
77
addition, the Division recorded 90 million of
integration costs. A year earlier, PPA effects and integration
costs totaled 248 million. Fiscal 2010 orders and
revenue rose 5%
year-over-year,
benefiting strongly from positive currency translation effects.
On a geographic basis, revenue and order growth in the Americas
and Asia, Australia more than offset slight declines in Europe,
C.I.S., Africa, Middle East. On an organic basis, orders and
revenue rose 3% and 2%, respectively, compared to the prior-year
levels.
Equity
Investments
In fiscal 2010, Equity Investments recorded a loss of
191 million compared to a loss of
1.851 billion a year earlier. The difference is due
mainly to a significantly higher loss related to our stake in
Nokia Siemens Networks B.V. (NSN) in the prior fiscal year. In
fiscal 2009, we took an impairment of 1.634 billion
on our investment in NSN. The prior-year loss from our stake in
NSN also included a charge of 216 million related to
an impairment of deferred tax assets at NSN. Furthermore, NSN
took restructuring charges and incurred integration costs of
507 million. These factors led to an equity
investment loss related to our stake in NSN of
2.177 billion in fiscal 2009. Also in fiscal 2009
Enterprise Networks Holdings B.V. (EN) incurred an operating
loss and took restructuring charges. As a result, we incurred a
loss of 171 million from our investment in EN in the
prior fiscal year. These losses were only partly offset by a
gain of 327 million from the sale of our stake in FSC
as well as equity investment income of 195 million
related to our stakes in BSH Bosch und Siemens Hausgeräte
GmbH (BSH) and Krauss-Maffei Wegmann GmbH & Co. KG
(KMW). For comparison, in fiscal 2010, the loss related to our
stake in NSN was 533 million. NSN recorded
restructuring charges and integration costs of
378 million in the current fiscal year. Also in
fiscal 2010, Equity investment income from our stakes in BSH and
KMW improved to a total of 277 million. Siemens
results from Equity Investments are expected to be volatile in
coming quarters.
Cross-Sector
Businesses
Siemens
IT Solutions and Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
% Change
|
|
|
therein
|
|
|
|
2010
|
|
|
|
2009
|
|
|
|
Actual
|
|
|
Adjusted(1)
|
|
|
Currency
|
|
|
|
Portfolio
|
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
(537
|
)
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit margin
|
|
|
(12.9
|
)
|
%
|
|
|
1.9
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New orders
|
|
|
4,226
|
|
|
|
|
4,501
|
|
|
|
|
(6)
|
%
|
|
|
(7)
|
%
|
|
|
1
|
|
%
|
|
|
0
|
%
|
Total revenue
|
|
|
4,155
|
|
|
|
|
4,686
|
|
|
|
|
(11)
|
%
|
|
|
(12)
|
%
|
|
|
1
|
|
%
|
|
|
0
|
%
|
External revenue
|
|
|
3,150
|
|
|
|
|
3,580
|
|
|
|
|
(12)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
therein:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe,
C.I.S.(2),
Africa, Middle East
|
|
|
2,725
|
|
|
|
|
3,129
|
|
|
|
|
(13)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
therein Germany
|
|
|
1,118
|
|
|
|
|
1,307
|
|
|
|
|
(14)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
366
|
|
|
|
|
399
|
|
|
|
|
(8)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia, Australia
|
|
|
59
|
|
|
|
|
52
|
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
Commonwealth of Independent States.
|
In fiscal 2010, Siemens IT Solutions and Services faced
operational challenges while operating in a highly competitive
environment. As a result, orders and revenue declined 6% and
11%, respectively compared to fiscal 2009 and profit turned
negative. The loss of 537 million was primarily due
to charges of 399 million related to the completion
of previously announced staff reduction measures related to a
strategic reorientation aimed at strengthening the competitive
position of the business. For further information see
Item 4: Information on the
companyStrategySegment strategies. Charges for
staff reduction measures in fiscal 2009 were
22 million. Profit in both fiscal years was also
burdened by project related charges, which were significantly
higher in the current fiscal year. As of October 1, 2010,
Siemens IT Solutions and Services was carved out of Siemens AG
as a separate legal entity which is a wholly owned, consolidated
subsidiary of Siemens AG. For further information on
78
charges related to the strategic reorientation of Siemens IT
Solutions and Services see Reconciliation to
Consolidated Financial StatementsCorporate items and
pensions.
Siemens
Financial Services (SFS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
September 30,
|
|
|
|
|
2010
|
|
2009
|
|
% Change
|
|
|
(in millions of )
|
|
|
|
Income before income taxes
|
|
|
447
|
|
|
|
304
|
|
|
|
47
|
%
|
Total assets
|
|
|
12,506
|
|
|
|
11,704
|
|
|
|
7
|
%
|
SFS raised its profit (defined as income before income taxes) in
fiscal 2010 to 447 million from
304 million a year earlier. The increase in profit
compared to fiscal 2009 came mainly from higher results in the
commercial finance business, driven by significantly lower
additions to loss reserves and higher interest results. Fiscal
2010 profit benefited also from positive net effects related to
various investments, including a gain of 47 million
on the sale of an investment. These factors more than offset
lower income from SFSs internal services business. Total
assets rose to 12.506 billion, due primarily to
currency translation effects.
The following table provides further information on the capital
structure of SFS as of September 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(in millions of )
|
|
|
Allocated equity
|
|
|
1,458
|
|
|
|
1,243
|
|
Total debt
|
|
|
10,028
|
|
|
|
9,521
|
|
therein intragroup financing
|
|
|
10,004
|
|
|
|
9,455
|
|
therein debt from external sources
|
|
|
24
|
|
|
|
66
|
|
Debt to equity ratio
|
|
|
6.88
|
|
|
|
7.66
|
|
Cash and cash equivalents
|
|
|
90
|
|
|
|
136
|
|
Both Moodys and Standard & Poors view SFS
as a captive finance company. These rating agencies generally
recognize and accept higher levels of debt attributable to
captive finance subsidiaries in determining long-term and
short-term credit ratings.
The allocated equity for SFS is primarily determined and
influenced by the size and quality of its portfolio of
commercial finance assets (primarily leases and loans) and
equity investments. This allocation is designed to cover the
risks of the underlying business and is oriented toward common
credit risk management standards in banking. The actual risk
profile of the SFS portfolio is evaluated and controlled monthly
and is reflected in the quarterly (commercial finance) and
annual (equity investments) adjustments of allocated equity.
Reconciliation
to Consolidated Financial Statements
Reconciliation to Consolidated Financial Statements includes
Centrally managed portfolio activities, SRE and various
categories of items which are not allocated to the Sectors and
Cross-Sector Businesses because the Companys management
has determined that such items are not indicative of the
Sectors and Cross-Sector Businesses respective
performance. For fiscal 2010, Companys management approved
special remuneration presented in Corporate Items which will be
allocated primarily to the Sectors in fiscal 2011.
Siemens completed the streamlining of Other Operations in fiscal
2009. Beginning with fiscal 2010, Segment Information includes a
new line item for centrally managed activities intended for
divestment or closure, which at present primarily include the
electronics assembly systems business and activities remaining
from the divestment of the former Com activities. Results for
the new line item, Centrally managed portfolio activities, are
stated on a retrospective basis.
79
Centrally
managed portfolio activities
For fiscal 2010, the result of Centrally managed portfolio
activities was a loss of 139 million compared to a
loss of 371 million a year earlier. Within this
improvement, the loss related to Electronics Assembly Systems
declined to 141 million in fiscal 2010, including
106 million provided for in connection with an
expected loss from the announced sale to ASM Pacific Technology.
For comparison, the prior-year period included a higher loss
related to Electronics Assembly Systems, primarily including
201 million related to the business due to operating
losses and charges for impairments and staff reduction measures.
In addition, fiscal 2009 included a loss related to the
divestment of an industrial manufacturing unit in Austria, as
well as higher net expenses related to divested businesses. Due
primarily to portfolio streamlining activities, revenue from
Centrally managed portfolio activities fell to
345 million from 503 million a year
earlier, despite higher sales from the electronics assembly
systems business.
Siemens
Real Estate
Income before income taxes at SRE was 250 million in
fiscal 2010, down from 341 million a year earlier,
due in part to lower income related to the disposal of real
estate. For comparison, the prior-year period included a gain of
224 million on the disposal of Siemens
residential real estate holdings. Both periods included costs
associated with Siemens program to bundle its real estate
assets into SRE and to initiate further efficiency measures,
including impairments. In fiscal 2010, these costs totaled
75 million and came in above the prior-year period.
Assets with a book value of 872 million were
transferred to SRE during the current fiscal year as part of the
real estate bundling program. SRE will continue to incur costs
associated with the program in coming quarters, and expects to
continue with real estate disposals depending on market
conditions.
Corporate
items and pensions
In fiscal 2010, Corporate items and pensions totaled a negative
1.479 billion compared to a negative
1.715 billion a year earlier.
Included therein, Corporate items improved from a negative
1.343 billion to a negative 1.292 billion.
Corporate items in fiscal 2010 included higher gains in
connection with compliance-related matters, including a gain of
84 million related to an agreement with the provider
of the Siemens directors and officers liability insurance,
a net gain related to settlements with former members of
Siemens Managing Board and Supervisory Board, and total
gains of 40 million related to the recovery of funds
frozen by authorities. Compared to fiscal 2009, the current
period included higher personnel-related expenses, including
expenses of 310 million related to special
remuneration for non-management employees. After determining the
allocation of this remuneration in the first quarter of fiscal
2011, the expenses will be allocated primarily to the Sectors in
fiscal 2011. Fiscal 2010 also included higher expenses
associated with streamlining IT costs for Siemens as a whole, as
well as charges of 61 million related to the
strategic reorientation of Siemens IT Solutions and Services,
primarily including carve-out costs. Further, the current fiscal
year included net charges related to legal and regulatory
matters as well as a gain of 35 million from the sale
of our Roke Manor activities in the U.K. In addition, fiscal
2010 included a net loss of 13 million related to a
major asset retirement obligation, compared to a higher net loss
in the prior year. In both periods, the net result related to
the asset retirement obligation included negative
interest-related effects from the measurement of the obligation
and positive effects from related hedging activities not
qualifying for hedge accounting. In addition, the net result
related to the asset retirement obligation included a gain of
60 million in fiscal 2010 due to revised assumptions.
For additional information, see Notes to Consolidated
Financial Statements.
For comparison, Corporate items in fiscal 2009 included net
charges of 235 million related to the global
SG&A program and other personnel-related restructuring
measures. Expenses for outside advisors engaged in connection
with investigations into alleged violations of anti-corruption
laws and related matters as well as remediation activities
amounted to 95 million in fiscal 2009. In addition,
the prior-year period included a positive effect related to
shifting an employment bonus program from cash-based to
share-based payment, which was offset by a charge of
53 million related to a global settlement agreement
with the World Bank Group.
80
Centrally carried pension expense was 188 million in
fiscal 2010, compared to 372 million a year earlier.
The change
year-over-year
was due to higher expected return on plan assets and lower
interest cost in the current period, as well as higher insurance
costs in the prior-year period related to our mandatory
membership in the Pensionssicherungsverein (PSV), the German
pension insurance association.
Beginning with fiscal 2011, central infrastructure costs
currently included in Corporate items will be allocated
primarily to the Sectors. Financial information for prior
periods will be reported on a comparable basis. For example,
comparable fiscal 2010 results will show allocated central
infrastructure costs of 585 million.
Centrally managed activities related to establishing Siemens IT
Solutions and Services as a separate legal entity and wholly
owned subsidiary of Siemens are expected to result in
substantial charges in coming quarters.
Eliminations,
Corporate Treasury and other reconciling items
In fiscal 2010, income before income taxes from Eliminations,
Corporate Treasury and other reconciling items was a negative
328 million compared to a negative
373 million a year earlier. The current period
benefited primarily from a decline in refinancing costs due to
lower interest rates, partly offset by changes in fair market
value from interest rate derivatives.
Fiscal
2009 compared to fiscal 2008
Results
of Siemens
The following discussion presents selected information for
Siemens for the fiscal year ended September 30, 2009:
Orders
and revenue
In fiscal 2009, revenue declined 1%
year-over-year,
to 76.651 billion, while orders came in at
78.991 billion, down 16% from the prior-year period.
This resulted in a
book-to-bill
ratio of 1.03. On an organic basis, excluding the net effect of
currency translation and portfolio transactions, revenue came in
level with fiscal 2008, while orders decreased 14%. Within the
full-year trend, we saw order intake declining in the second
half of fiscal 2009 compared to the first half due to adverse
trends in the global macroeconomic and financing environment,
while revenue development was significantly stabilized by our
strong order backlog. Accordingly, our
book-to-bill
ratio fell from 1.12 in the first six months to 0.94 in the
second half of fiscal 2009. The total order backlog for our
three Sectors was 81.2 billion as of
September 30, 2009, slightly down from
83.1 billion a year earlier, due primarily to
negative currency translation effects. Out of the backlog at the
end of fiscal 2009, orders of 36 billion were
expected to be converted into revenue during fiscal 2010, orders
of 17 billion during 2011, and the remainder in the
periods thereafter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Orders (location of customer)
|
|
|
Year ended
|
|
% Change
|
|
|
|
|
September 30,
|
|
vs. previous year
|
|
therein
|
|
|
2009
|
|
2008
|
|
Actual
|
|
Adjusted(1)
|
|
Currency
|
|
Portfolio
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
Europe,
C.I.S.(2),
Africa, Middle East
|
|
|
45,696
|
|
|
|
55,229
|
|
|
|
(17
|
)%
|
|
|
(13
|
)%
|
|
|
(2
|
)%
|
|
|
(2
|
)%
|
therein Germany
|
|
|
12,307
|
|
|
|
14,434
|
|
|
|
(15
|
)%
|
|
|
(13
|
)%
|
|
|
0
|
%
|
|
|
(2
|
)%
|
Americas
|
|
|
19,935
|
|
|
|
24,010
|
|
|
|
(17
|
)%
|
|
|
(21
|
)%
|
|
|
5
|
%
|
|
|
(1
|
)%
|
therein U.S.
|
|
|
14,691
|
|
|
|
17,437
|
|
|
|
(16
|
)%
|
|
|
(23
|
)%
|
|
|
8
|
%
|
|
|
(1
|
)%
|
Asia, Australia
|
|
|
13,360
|
|
|
|
14,256
|
|
|
|
(6
|
)%
|
|
|
(9
|
)%
|
|
|
3
|
%
|
|
|
0
|
%
|
therein China
|
|
|
5,525
|
|
|
|
5,446
|
|
|
|
1
|
%
|
|
|
(7
|
)%
|
|
|
8
|
%
|
|
|
0
|
%
|
therein India
|
|
|
2,309
|
|
|
|
2,268
|
|
|
|
2
|
%
|
|
|
7
|
%
|
|
|
(5
|
)%
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Siemens
|
|
|
78,991
|
|
|
|
93,495
|
|
|
|
(16
|
)%
|
|
|
(14
|
)%
|
|
|
0
|
%
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
Commonwealth of Independent States.
|
81
Orders related to external customers decreased 16% in
fiscal 2009, driven by sharp declines in Industry and to a
lesser extent in Energy. In the Industry Sectorour largest
Sector by revenueorder intake decreased more than 20%
compared to the high level a year earlier. All Industry
Divisions reported lower orders, led by declines at Drive
Technologies, Industry Solutions and Industry Automation. Due in
part to customer postponements of potential new projects, the
Energy Sector saw orders fall 10% from the high level of fiscal
2008, driven primarily by lower demand at Oil & Gas,
Power Transmission and Fossil Power Generation. In contrast,
order intake increased at Renewable Energy, as the Division won
large contracts for offshore wind-farm projects. Orders rose
modestly in Healthcare, benefiting from positive currency
translation effects from the U.S. In addition, orders at
Centrally managed portfolio activities declined significantly in
fiscal 2009 due primarily to substantial dispositions and other
streamlining actions.
In the region Europe, C.I.S., Africa, Middle
Eastour largest reporting regionorders declined
17%, including sharply lower order intake in Industry on
decreases in all Divisions. In most cases, the declines were
driven by macroeconomic conditions. Lower order intake at
Mobility in the region was due to lower volume from major orders
compared to fiscal 2008, which included Siemens
largest-ever rolling stock order, a 1.4 billion
contract for more than 300 trains from the Belgian state railway
system. Higher demand at Renewable Energy, driven by a number of
large orders in fiscal 2009, limited the drop in order intake in
the Energy Sector in Europe, C.I.S., Africa, Middle East to 4%.
Healthcare orders came in near the level of fiscal 2008 in this
region. In Germany, major contract wins at Mobility and
Renewable Energy softened the impact of a broadbased
decline in other Divisions and streamlining actions at Centrally
managed portfolio activities. In the Americas, orders
decreased 17% despite strong positive currency translation
effects from the U.S. Within the region, the contraction of
order intake was strongest in Energy, due mainly to a lower
volume from major orders at Renewable Energy compared to fiscal
2008. Orders in Industry also declined by double digits, due in
part to higher volume from large orders at Mobility in the
prior-year period. Healthcare orders came in just below the
level of fiscal 2008. In Asia, Australia, orders
decreased 6%, as a higher order intake in Healthcare was more
than offset by declines in Industry and Energy, particularly at
Industry Solutions, Drive Technologies, Oil & Gas and
Power Distribution. Order intake in China rose 1% compared to
the prior-year period, including a number of major contract wins
at Mobility as well as significant positive currency translation
effects. In India, lower demand in Industry was offset by a
higher volume from major orders at Power Transmission and Fossil
Power Generation in fiscal 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (location of customer)
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
Year ended September 30,
|
|
vs. previous year
|
|
therein
|
|
|
2009
|
|
2008
|
|
Actual
|
|
Adjusted(1)
|
|
Currency
|
|
Portfolio
|
|
|
(in millions of )
|
|
|
|
|
|
|
|
|
|
Europe,
C.I.S.(2),
Africa, Middle East
|
|
|
43,288
|
|
|
|
44,895
|
|
|
|
(4
|
)%
|
|
|
1
|
%
|
|
|
(2
|
)%
|
|
|
(3
|
)%
|
therein Germany
|
|
|
11,525
|
|
|
|
12,797
|
|
|
|
(10
|
)%
|
|
|
(8
|
)%
|
|
|
0
|
%
|
|
|
(2
|
)%
|
Americas
|
|
|
20,754
|
|
|
|
20,107
|
|
|
|
3
|
%
|
|
|
(3
|
)%
|
|
|
7
|
%
|
|
|
(1
|
)%
|
therein U.S.
|
|
|
15,684
|
|
|
|
14,847
|
|
|
|
6
|
%
|
|
|
(4
|
)%
|
|
|
11
|
%
|
|
|
(1
|
)%
|
Asia, Australia
|
|
|
12,609
|
|
|
|
12,325
|
|
|
|
2
|
%
|
|
|
(1
|
)%
|
|
|
3
|
%
|
|
|
0
|
%
|
therein China
|
|
|
5,218
|
|
|
|
4,878
|
|
|
|
7
|
%
|
|
|
(1
|
)%
|
|
|
8
|
%
|
|
|
0
|
%
|
therein India
|
|
|
1,680
|
|
|
|
1,885
|
|
|
|
(11
|
)%
|
|
|
(7
|
)%
|
|
|
(5
|
)%
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Siemens
|
|
|
76,651
|
|
|
|
77,327
|
|
|
|
(1
|
)%
|
|
|
0
|
%
|
|
|
1
|
%
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excluding currency translation and
portfolio effects.
|
|
(2)
|
Commonwealth of Independent States.
|
Revenue related to external customers declined 1% in
fiscal 2009, as lower revenue in Industry and streamlining
actions at Centrally managed portfolio activities offset
increases in Energy and Healthcare. The Industry Sector reported
a revenue decrease of 7% on lower sales in five of its six
Divisions, led by double-digit declines at Industry Automation,
Drive Technologies and OSRAM. In contrast, revenue at Mobility
rose 10% on increases in all regions. Fossil Power Generation
and Renewable Energy were the primary drivers for a 14% revenue
increase in Energy, as the
82
Sector executed projects in its substantial order backlog.
Healthcare revenue rose 7% compared to fiscal 2008, due
primarily to growth at Imaging & IT and Diagnostics as
well as substantial positive currency translation effects.
In Europe, C.I.S., Africa, Middle East, revenue declined
4%
year-over-year,
held back by negative currency translation and portfolio
effects, the latter due mainly to streamlining at Centrally
managed portfolio activities. Revenue in the region rose by
double digits in Energy and at a lower rate in Healthcare, and
decreased in the Industry Sector. Revenue in Germany declined
10% in fiscal 2009, due primarily to lower demand in the
Industry Sector, particularly in its short-cycle businesses, and
streamlining actions at Centrally managed portfolio activities.
In the Americas, revenue rose 3% due to significant
positive currency translation effects from the U.S. Revenue
growth in the region was strongest in the Energy Sector,
including double-digit increases at Renewable Energy, Fossil
Power Generation and Power Transmission. Healthcare also
reported higher revenues in the Americas, while Industry came in
below the level of fiscal 2008, driven by declines at OSRAM and
Industry Solutions. Asia, Australia saw a 2% expansion in
revenue on growth in Healthcare and Energy. Revenue in Industry
in this region declined 2% compared to the prior-year level.
Revenue growth in China was due primarily to positive currency
translation effects. Revenue declined in India driven by lower
sales at Drive Technologies and Oil & Gas.
Consolidated
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
September 30,
|
|
|
|
|
2009
|
|
2008
|
|
% Change
|
|
|
(in millions of )
|
|
|
|
Gross profit
|
|
|
20,710
|
|
|
|
21,043
|
|
|
|
(2
|
)%
|
as percentage of revenue
|
|
|
27.0
|
%
|
|
|
27.2
|
%
|
|
|
|
|
Gross profit for fiscal 2009 decreased 2% compared to the
prior-year period, as a strong gross profit increase in the
Energy Sector was more than offset by other factors, including
substantially lower gross profit in Industry and a sharp drop at
Centrally managed portfolio activities due to the streamlining
actions. Higher gross profit in the Energy Sector was due
primarily to Fossil Power Generation where gross profit in
fiscal 2008 was reduced by substantial project charges, and also
included volume-driven growth in gross profit at the majority of
Divisions. Lower gross profit in Industry was due primarily to
volume-driven declines at Industry Automation, Drive
Technologies and OSRAM as well as substantial severance charges
in fiscal 2009. For comparison, in fiscal 2008, gross profit in
Industry was held back by project charges at Mobility and
charges related to structural initiatives at Mobility and OSRAM.
Gross profit in Healthcare rose modestly
year-over-year,
despite further charges of 169 million related to
particle therapy contracts in fiscal 2009. For comparison, in
the prior-year period gross profit in Healthcare was held back
by substantial costs associated primarily with refocusing of
certain business activities at Imaging & IT and
charges related to particle therapy contracts at
Workflow & Solutions. In combination, these factors
led to a slight decline in gross profit margin for Siemens
overall, which came in at 27.0% in fiscal 2009 compared to 27.2%
a year earlier.
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
% Change
|
|
|
|
(in millions of )
|
|
|
|
|
|
Research and development expenses
|
|
|
(3,900
|
)
|
|
|
(3,784
|
)
|
|
|
3%
|
|
as percentage of revenue
|
|
|
5.1
|
%
|
|
|
4.9
|
%
|
|
|
|
|
Marketing, selling and general administrative expenses
|
|
|
(10,896
|
)
|
|
|
(13,586
|
)
|
|
|
(20)%
|
|
as percentage of revenue
|
|
|
14.2
|
%
|
|
|
17.6
|
%
|
|
|
|
|
Other operating income
|
|
|
1,065
|
|
|
|
1,047
|
|
|
|
2%
|
|
Other operating expense
|
|
|
(632
|
)
|
|
|
(2,228
|
)
|
|
|
(72)%
|
|
Income (loss) from investments accounted for using the equity
method, net
|
|
|
(1,946
|
)
|
|
|
260
|
|
|
|
|
|
Interest income
|
|
|
2,136
|
|
|
|
2,404
|
|
|
|
(11)%
|
|
Interest expense
|
|
|
(2,213
|
)
|
|
|
(2,208
|
)
|
|
|
0%
|
|
Other financial income (expense), net
|
|
|
(433
|
)
|
|
|
(74
|
)
|
|
|
>200%
|
|
R&D expenses increased to 3.900 billion,
or 5.1% of revenue, from 3.784 billion, or 4.9% of
revenue a year earlier, due primarily to higher outlays in
Energy. SG&A expenses declined substantially to
10.896 billion, or 14.2% of revenue, from
13.586 billion, or 17.6% of revenue in fiscal 2008,
including lower expenses in all Sectors. The change
year-over-year
also includes substantial expenses in the prior-year period
related to our global SG&A program, as the majority of the
1.081 billion in severance charges related to this
program were recorded as SG&A expenses in fiscal 2008.
During fiscal 2009, we already achieved the annual savings
target under our global SG&A program originally set for
fiscal 2010, despite additional severance charges recorded in
fiscal 2009.
Other operating income for fiscal 2009 was
1.065 billion, compared to 1.047 billion
in the prior-year period. Fiscal 2009 included a gain of
327 million on the sale of our stake in FSC. In
addition, gains from sales of real estate were also slightly
higher
year-over-year,
including a gain of 224 million from the sale of
residential real estate holdings. For comparison, fiscal 2008