Siemens May Cut Thousands Of Jobs, Bad Sign For Germany

Siemens AG (NYSE: SI), Europe's largest engineering company, is in early internal talks to slash thousands of jobs after posting quarterly results that came in sharply below analysts' estimates, a German newspaper reported Tuesday.

American Depository Receipts of Siemens AG (NYSE: SI) rose 1.78 percent, or $1.64, to $92.23.

Decisions could be made in October or November, according to financial daily Boersen-Zeitung, which did not specify its sources. A Siemens spokesman declined to comment.

According to the newspaper, discussion on job cuts and other cost-cutting measures have been underway since July.

At the end of July, Siemens cautioned that the global slowdown will make it harder to reach its full-year targets as it reported worse-than-expected fiscal third-quarter earnings and a fall in new orders.

Munich-based Siemens reported net earnings of €823 million ($996 million) for its fiscal third quarter - up from €462 million a year earlier. But that was sharply below analysts' €1.32 billion consensus estimates.

New orders fell off 23 percent to €17.77 billion from €22.94 billion - depressed by a lower number of large-scale orders like one from Germany's national railway last year for a new fleet of long-distance trains. The company said it had an order backlog totaling €100 billion in the quarter.

"The deceleration of the world economy has increased in the past few months," Chief Executive Officer Peter Loescher said in July. "We see growing reluctance among our customers regarding capital expenditures and stronger economic headwinds, especially in our industrial short-cycle businesses."

"Given the deteriorating environment, it is becoming more difficult to achieve our guidance for the fiscal year," he added.

Loescher said that the company's main focus is on increasing its productivity and efficiency, and it would draw up a new program to address that in the coming months, but hasn't provided details to date.

Siemens said Monday it purchased around 2.44 million shares between Aug. 11 and Aug. 17 as part of a buyback program. The company has bought back about 5.89 million shares in total between Aug. 3 and Aug. 17 as part of its program. The average buyback price was €73.64, and the buyback volume amounts to 434 million euros, according to data on Siemens's website. Siemens bought the shares on the Frankfurt Stock Exchange.

The German industrial conglomerate's annual management conference is scheduled for October.

Siemens' struggle is fresh evidence that the euro zone's problems have begun to damage multinationals in Germany -- the region's strongest economy.

Germany is no longer immune from the job-cut effects of the region-wide recession. German unemployment climbed for a fourth straight month in July as the sovereign debt crisis prompted companies to delay hiring.

The number of people out of work rose a seasonally adjusted 7,000 to 2.89 million in July, according to the Federal Labor Agency. The adjusted jobless rate held at 6.8 percent.