Kully Dhadda on the restructuring of Siemens

The radical overhaul of its business will cost the company 4m deutschmarks ($2.4bn)

Siemens, which recently announced the closure of its computer chip factory in Newcastle with the loss of 1,100 jobs, has been forced to restructure its operations in an attempt to improve profits.

The Asian economic turmoil has taken its toll

Siemens said it planned to off-load businesses worth DM17bn ($10bn), which employ 60,000 people.

The collapse in the worldwide price of computer chips and intense competition from Asia has caused Siemens' semiconductor business to plunge into the red.

It has now decided to float the business on the German stock market, as well as some of its electrical component businesses.

The group is also considering hiving off the retail and banking division of Siemens Nixdorf, its computer systems business.

A host of other businesses will be sold off.

Asian woes

Siemens' underlying net income edged up 2% to DM2.66bn in the year to 30 September.

However, the group has had to put aside an extra DM900m to cover a slump in sales associated with the global economic crisis which has hit Siemens' business.

The group's problems have been particulary acute in Asia, where revenues has fallen by a quarter.

But despite the drastic overhaul of the group Siemens chairman Heinrich Von Pierer denied that the restructuring would result in the heavy job losses trade unions had feared.

While he admitted that some job losses were inevitable, he said the number would not be in "the thousands."

Analysts welcomed news of the restructuring plan.

"It shows they are serious about finding a focus...(and) are prepared to do things which in the past would be impossible imagining them doing," said Susan Anthony, an analyst at Credit Lyonnais in London.

"The future looks good as Siemens' numbers were on the upper side of expectations," said another trader.