By Simon Thiel
Jan. 25 (Bloomberg) -- Siemens AG, the maker of products ranging from gas turbines to medical scanners, posted profit and sales that beat analysts' estimates, boosting the German company's stock as shareholders prepared to confront executives over bribery allegations.
Operating profit rose 51 percent to 1.63 billion euros ($2.1 billion), topping an estimate of 1.51 billion euros. Net income fell 16 percent to 788 million euros because of a European Union fine for price-fixing. Sales rose 6.1 percent to 19.1 billion euros, the company said today.
Chief Executive Officer Klaus Kleinfeld said Siemens, Europe's largest engineering company, is ``off to a strong start'' in the period. Siemens agreed yesterday to buy U.S. software maker UGS Corp. for $2.1 billion and said it will sell shares in its VDO automotive unit.
``We see the signs of a momentum shift which is pushing the company in the right direction,'' Boris Boehm, a fund manager at Nordinvest in Hamburg, which oversees $7 billion including Siemens shares. ``With the economic cycle in the upswing, Siemens is in the right sector.''
Siemens shares rose as much as 6.6 percent to 83.12 euros, their biggest gain in seven months, and traded at 82.98 euros at 1:50 p.m. in Frankfurt. Before today, they were up 11 percent in the past year, trailing a 26 percent increase in Germany's DAX 30 index.
Price-Fixing Fine
The acquisition of UGS, a supplier of production software to General Motors Corp., adds to $10 billion of takeovers since Kleinfeld took charge two years ago. A two-month bribery probe and the EU fine delayed the start of a networks venture with Nokia Oyj.
Siemens and nine other companies were fined yesterday by the European Commission, the EU's antitrust regulator, for fixing the price of equipment used to control electricity flow. Siemens said today it booked a charge of 423 million euros for the fine.
``While it's disappointing to see our net income growth reversed by an impact from events in the past, we are moving on with our operations tremendously improved year-over-year,'' Kleinfeld said in the statement. A reorganization, which has included 5,400 job cuts at the computer services division and purchases for the industrial units, is making Siemens ``more profitable and growth-oriented,'' he said.
The company's board is holding its annual shareholders' meeting at the Olympic hall in Munich.
Bribery Investigation
The median estimates of 14 analysts surveyed by Bloomberg were profit of 1.03 billion euros on sales of 18.47 billion euros. The estimates exclude the EU fine. It's the first quarter Siemens reported under International Financial Reporting Standards. Year-earlier figures were adjusted for IFRS.
``It's important for Kleinfeld to have something to put against the negative topics surrounding corruption and the EU fine today,'' said Frank Rothauge, an analyst at Sal. Oppenheim Jr & Cie. in Frankfurt, who rates the stock ``buy.''
A bribery investigation has rocked the 160-year-old company since Siemens made the allegations public in November. Police and prosecutors searched company buildings and employee homes at 30 German locations, and Siemens is reviewing the legality of 420 million euros of payments.
Kleinfeld and Chairman Heinrich von Pierer, Siemens' former CEO, say they didn't know about the bribes. They said in December that Siemens probably fell victim to a ``sophisticated'' criminal scheme by rogue employees in the telecommunications unit.
`Exceptional' Bad News
``This is a combination of bad news which is pretty exceptional,'' Kleinfeld said in an interview today, when asked about the bribery allegations and the EU cartel fine.
Kleinfeld also said he's ``very optimistic'' that the planned phone network venture between Nokia and Siemens will start in the first calendar quarter of 2007. The start of the venture was postponed because of the probe.
The investigation has grabbed Kleinfeld's attention as he works on a plan to reach profit targets that Siemens has so far missed. Kleinfeld scaled back the technology units and combined the unprofitable computer-services operations, called SBS, with the software units to form a new division.
In the first quarter, four of the 10 units didn't reach their margin target. Eight units reported rising profit. Kleinfeld reiterated today that he expects all units to reach their targets by April.
Acquisition, IPO
Siemens said earlier today it agreed to buy UGS and to sell shares in a car-equipment unit. UGS, based in Plano, Texas, makes software to plan and design production.
Siemens will retain majority control of VDO Automotive after an initial public offering, Siemens said. VDO is the world's largest maker of electronic systems that help deploy car air bags.
The share sale ``could be one of the biggest IPOs in 2007,'' Finance Chief Joe Kaeser told reporters in Munich today. He declined to give financial details and said Siemens aims to keep a ``long-term'' majority stake in the business because VDO ``will continue to grow profitably.''
The UGS acquisition comprises $1.4 billion of debt. UGS's software is used by customers including General Motors to design cars.
``After all the acquisitions in the last couple of months, we'll now focus on organic growth,'' Kleinfeld told reporters today. Kaeser said UGS might be Siemens' biggest purchase this year, ``although meaningful purchases are always possible.''
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