Siemens sees huge shortfall in telecom profits

Siemens reported disappointing results for the previous third quarter due to dismal performance from its telecom division. But one of the biggest drags on its performance soon won’t be a problem: The German vendor announced it has finalized the transfer of its handset division to Taiwanese vendor BenQ.

For its third quarter Siemens posted a net profit EUR 389 million ($472 million), a 52% decline from last year’s Q3 net earnings of EUR 815 million. Most of that shortfall, however, came from its Communications and Business Services Groups, which posted losses of EUR 70 million ($85 million) and EUR 109 million ($132 million) respectively. The blow to the Communications unit was particularly hard as it posted a EUR 209 million profit a year ago off of almost identical quarterly sales of EUR 3.4 billion. “At Communications we need to address weaknesses in the carrier and enterprise businesses in particular,” said CEO Klaus Kleinfeld at Siemens earnings call.

Those numbers don’t include results from its suffering handset division, which Siemens is now counting as a discontinued operation. BenQ is taking over the division in October, and Siemens is paying for the privilege, assuming a EUR 50 million investment in BenQ and investing an addition EUR 250 million to fund future operations. Once results for the handset division and other discontinued operations are taken out of the equation, Siemens income was EUR 650 million ($788 million), still a 28% fall from last year’s Q3 performance.

Siemens is a massive German conglomerate with its fingers in everything from medical equipment to power transmission to automotive equipment. It’s Communications and consulting services account for 25% of its EUR 18.8 billion ($22.8 billion) in quarterly revenues.