Siemens Healthcare

Siemens Healthcare ($SIE)
CEO: Bernd Montag
Based: Munich, Germany
2015 sales: $14.85 billion
2014 sales: $18.18 billion
Change: -18%

For Siemens ($SIE), sweeping change has been the answer to a laundry list of woes. Over the past year, the company has laid out a series of cost-cutting and restructuring measures to get business back on track and boost profitability.

Part of that plan involves retooling its healthcare unit. Siemens recently said that it would rebrand and expand its healthcare business under a new moniker, Siemens Healthineers. The move was meant to bolster the company's long-term strategy of strengthening its healthcare unit and expand its footprint in key growth areas.

Siemens hasn't wasted any time since announcing the rebrand. It recently announced that it would snatch up Germany liquid biopsy startup Neo New Oncology to enter the fast-growing molecular diagnostics field.

The company's decision to rebrand its healthcare unit also feeds into ongoing speculation that it could be prepping the business for an IPO. Siemens has already shed other businesses. In January 2015, the company reorganized its top brass to prep for a long-discussed spinoff of its health IT unit. A month later, it rolled out the first of its job cuts with plans to ax 7,800 jobs.

The cuts feed into Siemens' Vision 2020 plan, in which the company aims to save €1 billion ($1.14 billion) in costs by the end of 2016. "Our Vision 2020 concept will enable us to get our company back on a sustainable growth path and close the profitability gap to our competitors," CEO Josef Kaeser said when the first cuts were announced.

Siemens continued the layoffs in May 2015 with 4,500 additional job cuts, bringing the total number past 10,000. "With the initiation of these measures, the company's structural reorganization has been completed for the most part," Kaeser said at the time.

Throughout the changes, Siemens' healthcare unit managed to chart growth. The business, which comprises mostly diagnostics and imaging, delivered sales gains. In the first quarter of 2016, healthcare chipped in revenues of €3.28 billion ($3.61 billion), up 15% year over year.

"Healthcare is a really good business. It can be even greater," Kaeser said in May. "If you ask me again in a year from now about how great that business is, you'll be getting a good answer."

Success in the Chinese market contributed to growth in healthcare, even though Siemens faced corruption charges in the country. In 2014, Chinese regulators opened preliminary investigations into the company for allegedly using bribes to score exclusive contracts for its machines. In 2015, Siemens' health division came under fire for faking contracts in China.

Resolving those issues could play a key role in Siemens' turnaround plan. The device sector in Asia is expected to hit $15 billion in 2017, up from $2 billion in 2012, according to consulting firm Access China Management Consulting. Siemens, along with rivals Philips ($PHG) and GE ($GE), holds a large portion of that market with medical equipment including CT and MRI scanners, and the company stands to gain ground as the sector expands.

Siemens is also on the lookout for deals after rolling out some of its cost-cutting plans. The company's healthcare unit is "definitely hungry (for deals), but not for the sake of growth … but when it fits to the strategy we have laid out," Siemens Healthcare CEO Bernd Montag said at the European Congress of Radiology earlier this year. M&A could be "a means to an end," Montag said, as Siemens Healthcare leverages its new independence to build a stronger foothold in the industry.

-- Emily Wasserman (email | Twitter)

For more:
Siemens rebrands healthcare biz as it seeks to expand, adding services and more molecular Dx
Siemens Healthcare CEO says restructured unit is 'hungry' for M&A deals
Amid ongoing restructuring and layoffs at Siemens, healthcare leads
Siemens announces 4,500 more layoffs, recent cuts top 10,000
China launches probe against three med tech multinationals over bribery suspicions
Siemens preps for healthcare spinoff with exec shuffle, but profits slide

Siemens Healthcare