 |
|
| CURRENT SECTION :: News | UK's most visited IT Contractor Site - 250k unique visitors March 2008 |
|
 |
Siemens has issued a profit warning after being forced to write-off major contracts to the tune of €900million in the light of a combination of order delays and cancellations. Much of the earnings loss stems from its power generation and mobility businesses, but the company said its UK-facing IT division also played a part in the shortfall. In fact, Siemens IT Solutions and Services, which earns 20% of its revenue in the UK, will be €100m short when Europe’s biggest engineer reports its first quarter trading for 2008. The Munich-based company said it anticipates another dip of €600m from its Fossil Power Generation division, while its Mobility and Transport units will also earn €200m less than expected. "We're very disappointed by the deterioration of these legacy projects," Peter Loescher, the company’s chief executive said in a reported conference call. Although the outfit's recruitment of freelance IT workers is now expected to be pressured downwards, the reasons for hiring them will remain unchanged. "Contractors play an important part of our business model," a Siemens spokesperson said, "[by] helping with specialist skills as and when required, and we do not see any change to this approach in future." Steve Pragnell, managing director of PM3 Consulting, hinted that Siemens actually might pick up its external IT hires. He said: "Siemens has probably outsourced too much of its business with no impartial managers to help balance the projects." After its profit warning, Siemens vowed to be “more selective regarding turnkey projects in the future” – an allusion to it recently being booted off an €85m IT project with the DwP. “At the beginning of March this contract was cancelled after it became clear that on time completion of this project was not realistic for many reasons," Mr Loescher said yesterday. His organisation won the IT contract to provide the Department for Work and Pensions with a central payment system in 2006, with completion due later that year in October. But analysts now say the project is unlikely to be finished until December 2010, and is running 70% over its £90m budget, with final costs at an estimated £153million. Yesterday, Siemens moved to reassure investors on the back of its biggest one-day percentage fall in stock since 1991, by saying SIS management sees no further projects in its portfolio that contain such high risk. And though missing out on £709million, after cutting 6,800 telecoms jobs, shows Siemens to be the latest victim of the tech slowdown, the loss at its IT division is isolated to the DwP project. However, the department’s decision to cancel its IT contract has broader implications for the company, according to Ovum’s Georgina O‘ Toole and Cornelia Wels-Maug. “The key issue is that Siemens was hoping to use its experience at DwP to offer similar solutions to client recipients of DWP such as Jobcentre Plus and other 'funds flow' organisations such as HMRC and Defra,” the analysts said. “The cancellation will also inevitably impact Siemens' reputation at a time when it will be hoping that its involvement with major organisations such as DWP will have had a positive influence on its success at winning a share of the spend in relation to the National Identity Scheme.” Asked about the analysts' warning, a Siemens spokesperson said: "The public sector is an important market to us and is one in which we have delivered and continue to deliver IT projects successfully. It remains a strategic market for Siemens IT Solutions and Services." Meanwhile, the company conceded further write-offs are possible, either as a result of continuing investigations into allegations it bribed Nigerian officials, or after further project scrutiny. The company reviewed 39 out of a total of 62 projects to emerge with the €900m hit, which Joe Kaeser, chief financial officer, said isn’t immune to further increases during 2008, but should account for most of Siemens’ financial burdens. Mar 18, 2008 Email this article Printer friendly page Previous Page
|
|
   |
||||||||||||||||||||||||
| All content © Contractor UK Limited | http://www.contractoruk.com/lists/?p=subscribe&id=1[Register for News Letter] | [Privacy Statement] | [Terms of Use] | [Top of Page] |