Siemens ?accumulate?

02.01.07 - AC Research

NEW YORK, January 2 (newratings.com) ? Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on Siemens (SIE).

According to AC Research?s research note dated December 29 and published this morning, the company has received the largest single contract in its history. Together with Siemens, IBM received the so-called "Hercules" contract for the modernisation of the Bundeswehr IT system. The contract runs a total of ten years, with an order volume of about ?7.1 billion. According to Reuters, Siemens received roughly a 60% share of the total contract.

To execute the contract, the companies founded BWI Informationstechnik GmbH. The equal partners of Siemens Business Services (SBS) and IBM will hold a common share of 50.1% in this venture. The rest will be owned by the Bund. In the scope of the execution of the contract, SBS will be responsible for operating and modernizing the decentralized systems in more than 1,500 locations in Germany.

The awarding of this contract is a rather positive signal, the analyst says. For some time now, SBS has been viewed as the weak spot of the Siemens group. This significant reference contract will probably help SBS to improve its market position, the analyst adds. The contract is also considered as a good starting signal for the new IT Solutions and Services segment, which shall incorporate SBS in 2007, AC Research mentions.

At the closing price of ?74.84 on December 28 and a 2007/2008 P/E ratio of about 12, the company?s stock seems to maintain a rather moderate rating. The ongoing bribery affair at Siemens may be considered as a certain risk factor for the share price development over the next few weeks. It seems possible that the rather uncertain outcome of the proceedings would encumber the finalization of new business deals, since the bribery affair may lead to bewilderment among potential customers, the analyst says. On the basis of the moderate rating level, however, the company?s stock represents a slightly positive chances/risk ratio, the analyst adds.

AC Research reiterates its "accumulate" rating on Siemens.