In a bid to reduce operational costs and optimize its cost structure, Siemens AG (SI) reportedly announced that it will lay off approximately 1,100 employees in its energy division in Germany over the next two years. The company has about 86000 employees worldwide and the current headcount in Germany is 28000.
The lay off will primarily affect the fossil power and the oil and service gas units of the company, which are facing sluggish demand. To maintain its strong global growth momentum and increase its market share, Siemens AG needs to refine its cost structure. The restructuring action is expected to bring in stability and steady earnings growth in the near future.
Earlier, in the fourth quarter 2012, total sectors profit of Siemens AG declined 14.6% to €1.6 billion, down from €2.1 billion a year earlier. The decline was primarily due to project charges in Energy and Infrastructure & Cities.
Siemens AG is a German industrial conglomerate with interests in information services, automation and controls, medical equipment, power generation, transportation systems, automotive electronics, lighting, and many other areas. Given its product breadth and geographic diversity, the company is a major beneficiary of increased spending as developing nations build up their infrastructure. Its core businesses have seen a pickup in demand and the company is well positioned and looking for further growth primarily in the emerging markets.
Siemens AG currently has a Zacks #4 Rank, which implies a short-term Sell rating. We also have a long-term Neutral recommendation on the stock. One of its competitors, ABB Ltd (ABB) carries a Zacks #3 Rank, which translates into a short-term Hold rating.