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Siemens Seeks Damages From NSN Vice Chairman

Ray Le Maistre
7/30/2008

Siemens AG (NYSE: SI; Frankfurt: SIE) has entered yet another phase in its troubled relationship with the communications equipment sector by accusing a group of former senior staffers of being derelict in their duties during the company's recent corruption investigations. But get this: Light Reading has confirmed that one of those people accused is currently the vice chairman of carrier equipment joint venture Nokia Networks . (See Siemens Seeks Damages.)

Damage control
The German giant has announced it is seeking damages from former executives in relation to the long-running corruption and bribery scandal, and one of those executives is Rudi Lamprecht, the current vice chairman of Nokia Siemens Networks (NSN).

Siemens says it is seeking damages from 11 individuals, all of whom are former members of the German giant's executive committee. Siemens says it "bases its claims on breaches of their organizational and supervisory duties in view of the accusations of illegal business practices and extensive bribery that occurred in the course of international business transactions in the years 2003 to 2006 and the resulting financial burdens to the company."

The scandal, which first erupted in late 2006, has involved various parts of the Siemens empire, but started with an investigation into illegal payments involving its former carrier infrastructure business, Siemens Communications. (See Siemens Faces More Charges and Corruption Probe Targets Siemens Staff .)

Now Siemens is looking for compensation from those it believes could, and should, have done more while in their positions of power. In addition to Lamprecht, the former president of Siemens's mobile infrastructure business, the 11 individuals named include Dr. Thomas Ganswindt, former president of Siemens Communications, and former Siemens AG CEO Dr. Klaus Kleinfeld. (See Siemens Shuffles Top Deck, NSN Shuffles Board and Siemens Changes Management.)

When he was appointed to NSN's board in October 2007, Lamprecht was a member of the Siemens AG board, but he stepped down from that position at the end of last year: At that time Siemens noted he would "serve as a consultant" for NSN and other companies. A Siemens spokesman confirmed Lamprecht is still vice chairman of NSN, and stressed that Siemens has not initiated any legal proceedings against any of the 11 individuals, all of whom will have the chance to state their positions and answer Siemens's claims during the coming weeks.

Nokia Siemens declined to comment on the matter.

Enterprise handoff
In a separate move that further distances itself from the communications sector, Siemens has at last found a willing partner that will take its enterprise communications systems business off its hands. (See Gores Buys Siemens Stake.)

Having hived off its carrier equipment business into the joint venture Nokia Networks , which is now showing signs of getting into its groove, the German conglomerate has, after hunting around extensively, found a partner for its corporate user-focused business unit, Siemens Enterprise Communications (also known as SEN). (See Gores Buys Siemens Stake and Nokia Siemens Posts Blow-Out Q2.)

As part of its strategy to focus on its core energy, health care, and industrial business units, Siemens has been looking for a partner or buyer for loss-making SEN for at least a year, and has been revamping the unit to cut costs and transform itself from a hardware vendor to a "software and solutions provider." (See Siemens Eyes Unit Sale and Tough Times at Siemens.)

Now it has formed a joint venture with private equity group Gores Group LLC , in which Gores will hold a 51 percent stake. The new partners will each invest €175 million ($272 million) in the new company, which will comprise SEN plus two Gores companies, enterprise router and security system specialist Enterasys Networks Inc. , and call center software firm SER Solutions.

SEN is still a big business, generating revenues of €3.1 billion ($4.8 billion) in 2007, and was ranked as the fourth-largest supplier of enterprise voice systems in the world last year by Infonetics Research Inc. , but while it aspires to be the market leader in "unified communications," it trails rivals Avaya Inc. , Cisco Systems Inc. (Nasdaq: CSCO), and Nortel Networks Ltd. . (See Enterprise Voice Grows.)

Siemens noted that the creation of the new joint venture will result in "a substantial financial impact in the fourth quarter of Siemens fiscal 2008." So the pain isn't over yet for Siemens shareholders.

Recently, Nokia Siemens also sold an enterprise-focused unit. (See NSN Sells Optical Unit.)

— Ray Le Maistre, International News Editor, Light Reading

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