Optical/IP Networks

Siemens To Cut People and Plants

Siemens AG (NYSE: SI; Frankfurt: SIE) has announced the next step in its ongoing restructuring: namely, hefty cuts within its Information and Communications businesses, including the ICN (Information and Communications Networks Group), the division that houses the company's broadband and optical networking gear.

Siemens will cut 5,000 jobs within ICN by the end of the fiscal year, September 2002. Of these, 2,000 will be in Germany, the company says. These new layoff figures will be added to 5,000 jobs cut from ICN earlier this year.

With these new cuts Siemens will have reduced its ICN workforce by about 19 percent since the start of 2001.

The cuts were anticipated by industry sources (see Optisphere: Is It Safe? ), and fit expectations Siemens set this summer, when the CEO was replaced in the wake of poor financials (see Siemens Announces 'Mixed' Results and Mark Floyd).

In addition to new layoffs, Siemens plans to cut production for ICN and its companion divisions in half by selling, closing, reallocating, or simply halting activity in 10 of its 20 manufacturing plants worldwide that are devoted to making gear for the group.

"It hasn't been decided yet just what form the plant reduction will take," a Siemens spokesman says.

The plant closings and layoffs have caused some industry sources to speculate about what Siemens will do with its optical networking subsidiary Optisphere Networks Inc.. So far, that property has been relatively untouched by other Siemens restructuring efforts.

Some say Siemens may choose to fold the subsidiary back into ICN, thereby eliminating some of the cost of keeping the two separate.

Whatever the company chooses to do, it's clear that for the moment at least, optical networking isn't a top priority. "They haven't emphasized any efforts to gain market share in that segment over the last year," says Simon Scholes, analyst with financial services firm Bankgesellschaft Berlin.

In fact, Siemens appears to have shelved development of its own metro DWDM products after signing a deal with ADVA AG Optical Networking (Frankfurt: ADV) to resell its metro DWDM gear (see ADVA and Siemens Team Up).

Scholes says reduced demand for optical gear over the downturn has probably justified Siemens's optical reticence. "And it's probably good that they didn't seek to acquire any other companies in this space," he adds.

Overall, Scholes is positive about the cuts. "It's expected. All of Siemens's competitors have been reducing headcount and expenses for six months or more. This will help Siemens's business," he says.

Besides the ICN cuts, Siemens plans to eliminate about 2,000 more jobs from its ICM (Information and Communication Mobile Group), adding to 2,600 cuts already announced for that unit.

When added to the cuts announced earlier this year, the total is about 16,600 jobs cut from the entire group that includes ICN, ICM, and SBS (Siemens Business Services, the IT consulting and integration wing of the company). That figure represents about 14 percent of the group, and about 3 percent of Siemens's overall workforce.

— Mary Jander, Senior Editor, Light Reading
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