Siemens ?accumulate?

20.06.06 - AC Research

LONDON, June 20 (newratings.com) - Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on Siemens (SIE-EUR).

According to AC Research?s research note dated June 19 and published this morning, Siemens plans to bring its carrier networks and Nokia?s networking business into a new, legally independent joint venture. The 50:50 joint venture would operate under the name of Nokia Siemens Networks, with its main place of business in Finland, the analyst mentions. The deal is expected to be finalized by the end of the year, the analyst adds.

In 2005, the now emerging company realized sales of ?15.8 billion on a pro-forma basis, AC Research reports. Initially, the emerging company will emloy 60,000 people, the analyst mentions. In the course of the merger, the analyst expects the number of employees to be reduced by 10%-15%. This job cut would be an integral part of the intended synergetic effects, the analyst says. Siemens expects these effects to amount to around ?1.5 billion through 2010.

AC Research considers the deal as very positive for Siemens. The company can get rid of a major portion of its ailing telecommunictions business, the analyst mentions. This segment has generated only weak earnings in the recent past, while it missed Siemens? profit expectations, the analyst says.

At the current share price of ?67.80 and a 2006 P/E ratio of about 19, Siemens? stock still enjoys a rather moderate rating, according to AC Research. The new joint venture is expected to have a substantial positive impact on the company?s profits going ahead, the analyst says. Apart from other synergistic benefits, Siemens may save significant Research & Development expenses, the analyst adds.

AC Research reiterates its "accumulate" rating on Siemens.