2014 med tech R&D budget: $1.370 billion
Change from 2013 budget ($1.614 billion): -15.1%
Percent of 2014 segment sales ($13.9 billion): 9.5%
Med tech plays a big role in several major diversified conglomerates. Some, like Philips ($PHG), have opted to devote themselves to healthcare. Others, like Siemens, are separating it out further in hopes of gaining greater growth. The company is set to spin off its Healthcare unit as a separate company, but it is still slated to remain a part of the larger parent company. Most recently, Siemens described its Healthcare business as a "company within a company."
Siemens has also waded deep into cost-cutting, playing the conglomerate reorganization game of trimming costs while attempting to hold on to revenues and transition to growth. But it's not clear yet what the spun-off Siemens Healthcare will focus on after the separation is complete.
Siemens is an imaging and diagnostics powerhouse, so those seem likely to remain core proficiencies. But it seems likely to take a while for the thousands of job cuts and the corporate restructuring to settle down. In January, the executive lineup was named who will direct Siemens Healthcare as a separate entity.
"Healthcare has also been part of the long-term concept of the company, and we are in the middle and continue to prepare the Healthcare unit to be a powerful business within the company," Siemens Chairman, CEO and President Josef Kaeser said on a May earnings call.
He continued, "We like the business. It's strong. I like the business because it's highly innovative on our part. It has been a very competitive business. It retains a lot of free cash flow because of the payback of the acquisitions in the past."
But while healthcare margins and sales have improved of late, Siemens slashed its healthcare R&D last year. So, it may be tough to create a more innovative culture in the new corporate structure while they simultaneously work to reign in R&D spending.
Summed up the Siemens 2014 annual report, "We anticipate fundamental changes and new business models in healthcare markets and technologies. With the aim of continuing the success story of Siemens' medical engineering activities and of giving them greater freedom and better prospects for the future, we'll manage our healthcare business independently within Siemens--as a company within the Company." -- Stacy Lawrence (email | Twitter)
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