Siemens: Selloff upsets the Street

The Siemens India stock lost nearly 12 per cent on Friday with the Street seemingly upset about the firm’s decision to divest its stake in the IT unit, Siemens Information Systems (SISL). The management says it is part of a global strategy where the SISL business has been aligned with the global group. The price at which the transfer is being done has not been announced. The economic impact of the transfer of the business doesn’t appear to be too significant –the unit contributed around 11 per cent to the Rs 9,680 crore Siemens consolidated revenues in the year to September 2008.

Also, it would appear that the business wasn’t doing all that well — revenues declined 3 per cent in the year to September 2008 while the profit before tax (pbt) margin came off to around 7 per cent from 15 per cent in the previous year. That was probably because there was a change in the business strategy — earlier most of SISL’s revenues came from the Siemens AG and it was able to charge fees much like a third party service provider.

Of late, it had started working like any other captive software development centre and that had lowered revenues. According to analysts, the stock reacted because on previous occasions when the company had divested businesses, the transactions “were not entirely fair to minority shareholders.”

In 2007, Siemens had divested both the telecom and automotive segments.