Press Presse Prensa. For the business and financial press Munich, July 25, Siemens in the third quarter (April 1 to June 30) of fiscal 2001

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1 Press Presse Prensa For the business and financial press Munich, July 25, 2001 Siemens in the third quarter (April 1 to June 30) of fiscal 2001 Siemens earned billion in net income including Infineon and special items. Special items include a billion pretax gain on the irrevocable transfer of Infineon shares into Siemens domestic pension trust and a 292 million writedown related to a major contract cancellation. Net income excluding Infineon and these special items after taxes was a negative 489 million. ICN and ICM posted restructuring-related expenses of 790 million. In the third quarter of fiscal 2001 ended June 30, Siemens recorded mixed results in a weakening economic environment. While several operating Groups posted sizable earnings gains, others began restructuring in the face of sharply reduced demand, particularly in the Information and Communications business area. Overall, however, the company remains committed to previously announced EBITA targets for Our third quarter earnings are unsatisfactory, said Siemens CEO Heinrich v. Pierer. Over the coming weeks we will define further measures to improve our results, particularly at Information and Communication Networks. This prepares the way for us to achieve our medium-term earnings targets despite the weakness in our markets. Operation 2003 is fully under way. Excluding Infineon, sales climbed 23% to billion for the quarter, and orders also rose 23% to billion. Including Infineon, sales and new orders rose 19% and 13%, to billion and billion, respectively. These results include approximately 1.7 billion in sales growth from the acquisitions of SMS, Acuson, Atecs Man- 1/9

2 nesmann AG and Efficient Networks, all acquired since the end of the third quarter a year ago. Together with the quarterly Press Release, Siemens for the first time is presenting and commenting on a full set of financial statements, including three-month and nine-month income statements, balance sheet, cash flow statement and full segment information. Operations in the third quarter of fiscal 2001 (excluding Infineon) A number of Siemens operating Groups, including Power Generation, Medical Solutions, and Transportation Systems, turned in substantial earnings improvements during the quarter. Sharp declines in demand and increased pricing pressures particularly in the Information and Communications businesses, however, led to operating losses, charges, and impairments that more than offset these successes. Earnings before interest, taxes and goodwill amortization (EBITA) for Operations decreased to a negative 479 million compared to a positive 592 million in the same quarter a year earlier. The Information and Communications business area suffered, along with its competitors, the effects of adverse market conditions. Information and Communication Networks (ICN) faced deteriorating demand particularly among telecommunications operators and in the important U.S. market. The Group recorded a negative EBITA of 563 million, compared to a positive 133 million in the same period a year earlier. Included in this result are 420 million in charges. This total includes 134 million for inventory write-offs and capacity adjustments, a 45 million impairment of venture capital investments whose decline in value was determined to be other than temporary, and a write down of 241 million in receivables including those associated with Winstar Communications. These effects, combined with margin erosion in certain businesses and a negative 74 million EBITA at Efficient Networks, Inc. (Efficient), which was acquired in the third quarter, contributed to the Group s earnings decline. ICN s sales for the quarter grew 19% to billion, benefiting from the Group s sizable backlog. In contrast, new orders were flat at billion. The business of Efficient, a provider of digital subscriber line (DSL) broadband access equipment in the U.S., highlights the market s volatility. It experienced a rapid contraction of its customer 2/9

3 base during the quarter in the abrupt shut-down of operations by a number of previously fast-growing DSL service providers. In response to deteriorating market conditions, ICN is planning even more comprehensive adjustments in its cost structure and business portfolio, and is intensifying its efforts in working capital management. The 1.2 billion restructuring program we announced in Spring was ambitious, yet not enough, said Pierer. In the coming weeks we will define further steps to expand this program to at least 2 billion. This expanded program will focus on ICN s manufacturing capacity worldwide, its business portfolio, and further cost savings. The EBITA decline at Information and Communication Mobile (ICM) was due to margin erosion and intensified competition in a transitional market for the industry as a whole. The Group recorded a negative EBITA of 511 million. Included in this amount are charges totaling 370 million, primarily for inventory write-offs and capacity adjustments, and an impairment of 69 million related to ICM s 3% investment in Brokat AG. The profitable GSM infrastructure business delivered a positive operating result of approximately 110 million, which was insufficient to offset the charges above together with operating losses of approximately 180 million in the mobile phone business, resulting in a loss for the Group overall. Nonetheless, ICM reacted quickly and decisively in a difficult market, Pierer noted. ICM s sales grew 34% to billion compared to billion in the prior year, while new orders grew 12%, from billion to billion. This growth was due primarily to continued demand at the Mobile Networks Division. Mobile phone volumes for the quarter grew to 5.8 million units from the 5.6 million units sold into distribution in the third quarter a year ago. An estimated 1.2 million additional units reached consumers from stock already owned by distributors. Sales and orders at Siemens Business Services (SBS) both passed the 1.4 billion mark in the third quarter. Contract loss provisions in Group s outsourcing business, particularly in the U.K., were partly offset by a 44 million gain on the sale of its investment in SAP SI, resulting in EBITA of 7 million. SBS is taking steps to rebalance its capacities in the face of generally slower demand for IT services and as a result has announced plans to eliminate 2000 positions, including 1600 in Germany. 3/9

4 Within Siemens Automation and Control business area, Automation and Drives (A&D) increased its EBITA to 225 million in the third quarter compared to 220 million a year earlier. EBITA margin remained in double figures. Sales grew 10% compared to a year earlier, but as anticipated new orders were flat reflecting slowing economic growth, particularly in the U.S. but also in Europe. Industrial Solutions and Services (I&S) achieved double-digit growth in sales and orders. Weakness in the Group s plant engineering businesses, however, lowered its overall EBITA to a negative 10 million compared to a loss of 6 million in the third quarter of fiscal Siemens Dematic (SD) was formed during the quarter via a merger of the existing businesses of Siemens Production and Logistics Systems (PL) and Dematic AG (part of the Atecs acquisition). Dematic contributed 348 million in sales and 268 million in orders, resulting in totals of 721 million and 526 million, respectively, for the Group during the quarter. EBITA was a negative 102 million, as substantially reduced capital expenditures in the semiconductor industry, electronics manufacturing and other sectors sharply decreased demand for the Electronic Assembly Division s pick-and-place systems, while demand also weakened in the Postal Automation Division. Profitability was also impacted by provisions for certain contracts in the Group s project businesses. At Siemens Building Technologies (SBT), slowing demand for fire safety and building security solutions combined with margin erosion in Europe limited the Group s EBITA to 40 million. Sales of billion were 17% above the level a year earlier. In the Power business area, Power Generation (PG) was a standout for Siemens as a whole. PG s sales surged 23% to billion, and EBITA jumped to 197 million. Order growth accelerated to 29%, with billion in new orders taking the Group s bulging backlog to 27 billion in future business, including reservations. PG achieved these substantial gains in third-quarter sales and orders despite the fact that thirdquarter results a year ago included Siemens nuclear operations, which were spun off into the Framatome ANP joint venture in the second quarter of this year. The Fossil Power Generation Division again drove PG s performance. Strong U.S. demand for PG s gas turbine technology continued, while Europe and Asia began to show renewed growth as well. Currency translation effects contributed 6% to the Group s sales for the 4/9

5 quarter. Power Transmission and Distribution (PTD) posted EBITA of 21 million and 40% sales growth compared to the prior year, led by the High Voltage Division. Orders grew 16%, led by the Energy Management and High Voltage Divisions. In response to continued price pressure in the product business of the Metering Division, PTD initiated a program to rationalize the division s production capacity and streamline its business processes. In the Transportation business area, Transportation Systems (TS) won an order for 1,200 passenger railcars and related maintenance in the U.K., one of the largest single orders in Siemens recent history. TS also won a large order for a fully automatic metro line in Toulouse, France. These contracts pushed new orders up billion, to billion for the quarter, and took the Group s backlog past the 10 billion mark. TS also improved its EBITA from 19 million to 48 million. Siemens Automotive (AT) was reorganized and renamed Siemens VDO Automotive (SV), as the Group absorbed the VDO automotive operations of Atecs. The addition of VDO boosted the Group s sales by 789 million, resulting in total sales of billion in the quarter. Continuing development costs for advanced diesel injection systems and navigation systems, combined with a charge of 35 million associated with the divestment of its wiring harness plants, resulted in an EBITA of negative 60 million. Medical Solutions (Med) increased its EBITA significantly, to 177 million compared to 128 million in the prior year, and maintained its EBITA margin in double digits. The Group s recent acquisitions, Shared Medical Systems (SMS) and Acuson, drove Med s 56% increase in sales and 64% increase in new orders year-over-year, to billion and billion, respectively. Currency translation effects contributed 7% to sales for the quarter. SMS and Acuson position Med strongly in the high-growth areas of medical services and ultrasound technology. Among the Group s other offerings, diagnostic imaging systems and hearing instruments also continue to experience significant growth. In the Lighting business area, Osram delivered 100 million in EBITA. Sales rose to billion, including growth in the strategic photo-optic and optical semiconductor businesses. In response to the slowing economy in the U.S., which particularly affects 5/9

6 its general lighting and automotive lighting businesses, Osram successfully implemented cost-reduction programs that preserved operating margins at 9%. EBITA for Corporate, eliminations was a negative 48 million in the third quarter, compared to a negative 297 million in the third quarter a year ago. Included in Reconciliation to financial statements are the billion pretax gain from the irrevocable transfer of Infineon shares and the 292 million write-down of assets related to the Argentine outsourcing contract noted above. Due to recent acquisitions, amortization of goodwill and IPR&D charges increased to 257 million. Financing and Real Estate in the third quarter of fiscal 2001 Siemens Financial Services (SFS) continued to deliver strong earnings, as profitable performance at Credit Portfolio Management in the Equipment and Sales Financing Division was offset by higher loan provisions in the Division s Mid Market Finance business. Pretax income at Siemens Real Estate (SRE) declined to 48 million compared to 58 million in the prior year, mainly due to a decrease in gains on the disposal of real estate. Siemens Worldwide results for the third quarter (including Infineon) Third-quarter net income for Siemens Worldwide (which includes Infineon) excluding special items was a negative 705 million, compared to a positive 628 million a year earlier. Sales and new orders increased 19% to billion and 13% to billion, respectively. Third-quarter sales at Infineon were down 30% to billion. Infineon s EBIT for the quarter decreased 964 million to a loss of 598 million. Infineon released its third-quarter earnings separately on July 23, Nine-month liquidity, capital spending and balance sheet highlights (excluding Infineon) At June 30, 2001, cash and cash equivalents for Siemens excluding Infineon stood at billion, compared to billion at the end of fiscal Capital spending (excluding Infineon) for the year to date rose to billion compared to billion at the same point a year earlier. Of this total, billion was spent on property, plant and equipment. The sum of billion was spent on acquisitions, primarily Acuson, 6/9

7 Atecs and Efficient, and investments. The corresponding figures for the first nine months of fiscal 2000 were billion for property, plant and equipment, and billion for acquisitions and investments. Total assets for Siemens excluding Infineon increased billion compared to the prior year s end. The increase is primarily associated with the acquisition of Atecs, Acuson and Efficient, a prepaid pension asset resulting from the irrevocable transfer of Infineon shares into the domestic pension trust, and the impact of overall business growth. The wider market s pronounced slow-down not only contributed to a deterioration of profitability, but also had a negative impact on net cash provided in operating activities, which decreased billion excluding Infineon compared to June 30, Continued divestment of assets held for sale from the Atecs acquisition are expected to positively impact liquidity in the coming quarters. Siemens results for the first nine months (excluding Infineon) Net income for the first nine months (October 1, 2000 June 30, 2001) excluding Infineon and special items fell to 652 million from billion in the same period a year earlier. EBITA from Operations decreased 26%, from billion in the first three quarters of the prior year to billion in the current year. Siemens posted an 18% gain in sales to billion for the nine-month period, while orders increased even faster, from billion to billion year-over-year. Currency translation effects contributed 3% to orders and sales for the first nine months, and acquisitions including SMS, Atecs, Acuson and Efficient contributed approximately 2.6 billion. Siemens Worldwide results for the first nine months (including Infineon) For the nine-month period, net income for Siemens Worldwide excluding special items was 651 million, down from billion in the same period a year earlier. Sales and orders climbed 16% to billion and 17% to billion, respectively. Nine-month trends in international activities (excluding Infineon) International activities continued to dominate the company's business in the first nine months. Orders in Germany increased 11% to billion from billion in fiscal International orders rose faster, from billion in the first nine months 7/9

8 a year ago to billion in the first nine months of the current year, an increase of 27%. Sales in Germany grew 3% to billion, while international sales rose 23% to billion. International business now accounts for almost 80% of Siemens total volume. Orders in the U.S. for the first nine months climbed 44% to billion and sales rose 36% to billion. In Asia-Pacific, orders rose 28% to billion and sales 35% to billion. China continued to account for the largest share of sales in the region, contributing billion. In Europe outside Germany, orders and sales increased 17% and 9%, respectively. Outlook and subsequent events It appears that the global economic environment will continue to be difficult over the next few months. In some emerging markets, there are certain additional risks. Independent of these factors, in the coming months Siemens priorities are further restructuring the I&C groups and integrating the acquisition of Atecs. Taking these factors into account, we expect that net income after taxes for fiscal 2001 will be below last year s level, Pierer said. We are sticking to our earnings targets for The steps we are taking to achieve this are combined under the title Operation Subsequent to the close of the third quarter on June 30, 2001, certain events took place that may have an affect on Siemens financial or operating position. These events include the following: In July 2001, Infineon raised new capital through the issuance and sale of 60 million shares of stock. Siemens did not participate in this offering, which had the effect of reducing Siemens stake in Infineon from 56% to 51%. In July 2001, the FASB published Statement 141, Business Combinations, and Statement 142, Goodwill and Other Intangible Assets: Statement 142 changes the accounting for goodwill. The practice of amortizing goodwill, including goodwill recorded in past business combinations, will cease upon adoption of the 8/9

9 Statement. In anticipation of Siemens adoption of Statement 142 in fiscal 2002, Siemens is assessing its potential impact and preparing for early adoption of the new rule. In July 2001, Siemens announced the sale of Mannesmann Plastics Machinery AG to Apax Funds. The sale is subject to review by regulatory authorities. It is expected to close in the fourth quarter of fiscal Notice: A telephone conference for journalists with CEO Dr. Heinrich v. Pierer and CFO Heinz-Joachim Neubürger will be transmitted live on the Internet beginning at 8:00 a.m. You can access the conference at Please go to the Web site early enough to download software, if needed. A recording of the telephone conference will be available later at the same location. Dr. v. Pierer and Mr. Neubürger will hold a telephone conference with analysts at 3:00 p.m. and you can also follow the conference live on the Internet. Please go to under the heading Investor Relations. This interim report contains forward-looking statements based on beliefs of Siemens' management. The words "anticipate," "believe," "estimate," "forecast," "expect," "intend," "plan", should and "project" are used to identify forwardlooking statements. Such statements reflect the company's current views with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results to be materially different, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products, lack of acceptance of new products or services and changes in business strategy. Actual results may vary materially from those projected here. Siemens does not intend or assume any obligation to update these forward-looking statements. 9/9

Press Presse Prensa. For the business and financial press Munich, November 14, Siemens in fiscal 2001

Press Presse Prensa. For the business and financial press Munich, November 14, Siemens in fiscal 2001 Press Presse Prensa For the business and financial press Munich, November 14, 2001 Siemens in fiscal 2001 Siemens earned 2.088 billion in net income including Infineon, special items as well as restructuring