Siemens reports lower profit, buys UGS & plans IPO of VDO

Siemens AG on Wednesday came up with an array of announcements, which includes its acquisition of U.S. software maker UGS Corp., an initial public offering of its automobile unit VDO Automotive, and the first-quarter profit.

German conglomerate Siemens, which is Europe's largest engineering company, said it has agreed to buy U.S. software maker UGS Corp. for US$2.1 billion, and will assume $1.4 billion in UGS debt.

By acquiring the Plano, Texas-based UGS, Siemens intends to add industrial software for planning, design and simulation to its factory-automation unit, A&D’s automation-technology portfolio.

UGS, the world's 11th largest software maker whose products are used to design complex products such as airplanes, automobiles and military systems, is owned by three private equity firms, Bain Capital LLC, Silver Lake Partners and Warburg Pincus LLC.

These firms bought UGS from technology services provider Electronic Data Systems in March 2004 for $2.05 billion. UGS had posted revenue of $1.15 billion in 2005, however, lost $22 million later in the year. It competes with software vendors and developers such as Dassault Systemes SA, Parametric Technology Corp. and SAP AG. The company employs 6,400 workers and 900 contractors.

The deal still requires approval of regulators in the United States and Europe, and the sellers, the three equity firms, have yet to set a timetable for completing the sale, as per told by John Clendening, a UGS spokesman.

In another announcement, Siemens said that it will sell shares in automotive engineering unit VDO, which had annual sales of $13 billion in the last fiscal year. Siemens said it would remain the major stockholder in VDO, however, declined to disclose the size of the stake.

The German company announced an initial public offering (IPO) of VDO, its most successful ventures in order to provide the car-equipment unit additional financial resources and flexibility for future growth.

Siemens shares had their biggest gain in seven months after the company said operating profit rose 51 percent to 1.63 billion ($2.1 billion), compared with an estimate of 1.51 billion euros. Net income fell 16 percent to 788 million euros because of a European Union fine for price-fixing. Sales rose 6.1 percent to 19.1 billion euros, the company said today.

Siemens also reported net income of 788 million euros, a decrease of 16% for the first quarter of fiscal 2007, ending December 31, 2006, compared to 939 million euros in the prior-year period. However, the sales rose 6.1 percent to 19.1 billion euros, the company announced Thursday. Basic earnings per share were 0.83 euros and diluted earnings per share were 0.80 euros, compared to the last year’s both basic and diluted earnings per share, which were 0.99 euros. The company said its operating profit rose 51 percent to 1.63 billion euros ($2.1 billion), giving the biggest boost to its shares in seven months.

For the decrease in net income the German conglomerate blamed the fine it faced for fixing the price of equipment used to control electricity flow. The European Commission, the EU's Brussels-based antitrust regulator, on Wednesday fined Siemens and nine other companies a combined $978 million for fixing the prices for heavy equipment used by power utilities.

As Siemens played a leadership role in fixing prices, it was ordered to pay $517 million - the second-highest cartel fine the EU has ever levied.

Announcing the quarterly results, Siemens CEO Klaus Kleinfeld said, “While it's disappointing to see our net income growth reversed by an impact from events in the past, we are moving on with our operations tremendously improved year-over-year.”

Shares in Siemens rose $1.77, or 1.8 per cent, to close at $100.19 on the New York Stock Exchange.