Following a 13% reduction in profit at Siemens Healthcare during the previous quarter, the conglomerate is reportedly planning to cut 7,400 jobs companywide in a bid to achieve cost savings of €1 billion ($1.14 billion).
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| Siemens Healthcare CEO Joe Kaeser |
CEO Joe Kaeser hinted that layoffs are around the corner during January's earnings call, saying "We are also working intensively on our simplification efforts to achieve cost savings of €1 billion and are fully on track to meet the announced schedule. For Germany, we will enter into discussions with key stakeholders as early as next week to negotiate specific agreements."
Bloomberg reports that 3,300 of the layoffs will be in Germany.
"They are mostly white-collar employees with higher per-head salaries and indirect costs," JP Morgan analyst Andreas Willi told Bloomberg, adding, the "number makes sense and is in line with what I expected."
The company cited its power and gas and healthcare units as laggards during the most recent earnings call, which can't be reassuring to the company's energy and med tech employees.
Revenues at Siemens Healthcare, best known for its imaging devices, were up 6% to almost €2.9 billion ($3.32 billion), but profit declined 13% to €413 million ($472 million), in large part due to shrinking profit margins. They fell from 17.6% to 14.5% year over year, to the concern of the equity analysts participating in the earnings call.
"Profitability, with a margin of 14.5%, was temporarily below the target range, due to a mostly unfavorable business mix," Kaeser said, citing fewer sales of high margin imaging equipment, higher R&D expenses, and unfavorable exchange rates.
Actually, exchange rate fluctuations added to Siemens' overall revenue growth, according to the earnings release. Revenues at Siemens Healthcare specifically grew 2% on a constant currency basis; the release says the "currency tailwinds are not yet evident due to hedging."
Layoffs would be the latest in a series of changes at Siemens Healthcare. Last October, Siemens started operating the unit as a standalone entity. Kaeser said "the plan to transfer the business into separate legal entities and optimize the organization" is on track.
Also on track are the divestitures of the company's hospitals information system and microbiology businesses, which should close in the company's second fiscal quarter, Kaeser said. And the divestiture of Siemens hearing aids business to private equity firm EQT Partners for $2.7 billion is complete.
Declining profits and divestitures are bad omens for nervous Siemens Healthcare employees. But the good news, at least from their perspective, is that low oil prices have hurt the company's oil and gas unit, meaning it should bear some of the lost jobs too.
The looming round of cutbacks would be on top of a 15,000-job layoff announcement in September 2013.
- here's the Bloomberg article