Siemens AG (fka SI)

[Enterprising Investor]

New Siemens CEO Promises More-Stable Course (7/3/13)

By ANTON TROIANOVSKI And FRIEDRICH GEIGER

Siemens AG scrambled to reassure investors Wednesday, with new chief executive urging patience and promising to put the German engineering giant on a more-stable course after a week in which the company issued a surprise profit warning and then fired his predecessor.

Joe Kaeser, the company's chief financial officer and newly appointed leader held a news conference in Munich, where Siemens is based, and then hosted a conference call with analysts, insisting that the company's business was fundamentally sound and that he would put it on an a better footing.

His comments came as he prepared to take the reins Wednesday from CEO Peter Löscher, who was ousted by the Siemens board after a string of financial disappointments and strategic missteps. Those missteps culminated in last week's warning that Siemens wouldn't meet its profit-margin goals, which sent its shares into a nose dive.

Mr. Löscher's exit from Siemens, whose products range from trains to medical scanners to hearing aids, represents an acknowledgment that Siemens had gone astray in pursuing fast growth in recent years while competitors retrenched amid the global downturn.

"We have been trying to achieve too much too quickly," Mr. Kaeser told analysts. "There needs to be more focus on projects, on execution, on quality and reliability."

Siemens, one of German's largest companies, said Mr. Löscher's departure was by mutual consent and was approved unanimously by the company's board. But at a company where senior-management changes are carefully choreographed, sometimes years in advance, Mr. Löscher's tumultuous exit—first announced in a terse Saturday-night news release that didn't name a successor—signaled internal divisions that have riveted Germany's business world.

A spokesman for German Chancellor Angela Merkel said Monday that it was important for Siemens to return to calmer waters.

"The top priority is to calm our enterprise and to stabilize its internal organization," Mr. Kaeser said in Wednesday's news conference.

The new CEO, a three-decade Siemens veteran, asked investors for patience and promised to provide more details this fall on his vision for the company and its medium-term prospects. He said much of Siemens's business was going well, and that he would leave much of the company as is and "only change some things."

Mr. Kaeser's appointment to the top job harks back to the 166-year-old Siemens's past culture, which was disrupted by a far-reaching bribery scandal several years ago. In 2007, Mr. Löscher, an Austrian, became the first outsider to lead Siemens and showed little hesitation in challenging many of its ways.

Mr. Löscher, a former Merck & Co. executive, succeeded in repairing Siemens's reputation in the wake of the bribery scandal. But he failed to meet the ambitious financial goals he set for the group. He also presided over several major slip-ups, including delayed deliveries of high-speed trains and an ill-fated effort to connect offshore wind farms to the power grid that have led to hundreds of millions of dollars in charges.

Still, Mr. Löscher is likely to walk away with a severance payment of about €15 million, or nearly $20 million, as well as his €15 million pension, according to severance guidelines and details of his compensation published in Siemens's annual report.

Investors appeared to welcome Mr. Kaeser's appointment. In Frankfurt trading Wednesday, the company's shares rose 2.1% to €82.20 on a day that Germany's blue-chip stock index was essentially unchanged.

But some investors questioned whether Mr. Kaeser bore some responsibility for Siemens's recent mistakes. "It remains to be seen whether he will do things much differently as CEO, as after all, he's been partly responsible for the strategy pursued at present because he's been chief financial officer up until now," said Union Investment fund manager Christoph Niesel.

Releasing its quarterly earnings a day ahead of schedule, Siemens said Wednesday that its profit rose to €1.07 billion in the third quarter from €743 million a year earlier, when the cancellation of the initial public offering of Osram Licht AG led to a hefty charge.

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