Siemens Enterprise CEO says orders stabilizing

Reuters News
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Posted: Oct 05, 2011 1:58 PM
Siemens Enterprise CEO says orders stabilizing

By Sinead Carew

NEW YORK (Reuters) - Siemens Enterprise Communications Inc, a provider of communications equipment and software to corporations, is seeing demand stabilize after a severe collapse in orders earlier this year, according to the company's chief executive officer.

The company, which generates about 70 percent of its revenue in Europe, saw customers take more than three times as long as usual to make purchasing decisions because of economic concerns, CEO Hamid Akhavan told Reuters.

The executive said some customers are taking more than 330 days to close big technology supply contracts compared with a more typical sales cycle of 90 days to 100 days.

"The fact there is so much back and forth shows people are very careful about how they spend," he said, noting that contracts for more than $5 million were the slowest but that even $1 million contracts were taking up to eight months to close, about twice as long as in a normal economy.

Akhavan said the biggest drop in demand was in January this year, and since then the market has appeared to stabilize.

"I believe that the worst is behind us," he said. "Businesses have held up for so long they can't hold off any longer. People have to start renovating ... I just don't see it getting any slower."

The worst decline in sales was in southern Europe, with a 30 percent drop in revenue in Spain, while northern European markets were also hurting, according to Akhavan, who also noted a single-digit decline in sales in Germany and a decline of about 10 percent to 15 percent in the United Kingdom.

The company, which is 49 percent owned by Siemens AG <SIEGn.DE> and 51 percent owned by private equity firm Gores Group, competes with companies like Cisco Systems Inc <CSCO.O>, privately held Avaya and Microsoft Corp <MSFT.O>.

Siemens Enterprise generated roughly 2.2 billion euros ($2.9 billion) in annual revenue for its fiscal year 2011, which ended in September. This was about 2-3 percent lower than 2010 revenue, excluding items such as divestitures, according to Akhavan.

However, the executive said he is happy with current staffing levels of about 11,000 people at his company and has no plans for layoffs despite the tough economic conditions.

Earlier this year the company told Reuters that a U.S. initial public offering was a potential strategic option for the company. But Akhavan said on Wednesday that Gores is in no rush for a public listing in a difficult market.

"There is absolutely no sense of urgency for an accelerated exit." he said.

Akhavan said he would be interested in participating in mergers in the future but added that any deals would be aimed at improving the company's customer base or expanding its sales force or distribution rather than adding new products.

"We've a very good portfolio. I don't think we'd do it to enhance the portfolio," he said.

(Additional reporting by Nicola Leske in Frankfurt; editing by Gerald E. McCormick)