- 03 April 2006 -

Spring sales: Siemens, Unaxis and Sanyo restructure

As March drew to a close the Spring sales got underway. An unusual number of companies were restructuring their semiconductor businesses. Most of the action was in Europe: Siemens took yet another step away from chip manufacturing in the process bringing another new name to the business. Coincidentally, Swiss technology group Unaxis Holding AG reckons the sale of its semiconductor business will provide at least SFr600 m. Meanwhile, over in Japan, Sanyo plans to spin off its loss-making chip unit.

Alcatel and Lucent merger

Just as April turned, Alcatel and Lucent Technologies reached agreement on a $13.4 bn merger to create a French-American maker of telecom equipment with revenue of $25 bn, 88,000 staff worldwide. If this pans out then it could trigger a wave of copycat mergers, analysts say, from the likes of Ericsson, Nortel Networks and Siemens.

The newly merged company will be given a new name shortly and will be based in Paris around Alcatel's HQ. Serge Tchuruk, Alcatel's chairman and chief executive, will be non-executive chairman, and Patricia F. Russo, Lucent's chairman and chief executive, chief executive. Bell Labs will stay in Murray Hill.

There will be the inevitable purging of duplicate positions with 10% job losses expected over the next three years. The merger was approved by the boards of both companies in the past couple of days and should close in 6 to 12 months but has to be approved by shareholders and regulators in Europe and the USA, including the Committee on Foreign Investment in the USA, overseen by the Treasury Department, and the Justice Department's antitrust division.

Sanyo spin off

Earlier, Sanyo Electronics confirmed its plan to spin off the loss-making semiconductor division this summer. Sanyo plans to take the chip spin-off public and attributes this course of action to its not being able to fully recover from the damage to a key fab in the 2004 earthquake. Likely the independent unit can achieve better competitiveness as a separate entity.

It is part of a company-wide restructuring plan it began last year. The target is to remove 15% of the total workforce which will involve shutting down various as-yet un-named facilities.

Siemens refocus

Meanwhile, Germany's Siemens is also continuing to refocus its business. The latest step is to sell of its 12.5% stake in components-maker Epcos, the unprofitable maker of components for the automotive and electronics industries. Soon after the news broke, shares of Epcos dropped as much as 4.3%. Siemens has also sold its entire 18% stake in Infineon Technologies AG for E1.1 bn. It is the latest step in the strategic plan from Klaus Kleinfeld's, the new CEO, who had announced 7,000 job cuts. These will mainly be at the telecom and computer-services divisions. He sold the unprofitable cellphone unit to Taiwan's Benq Corp.

Qimonda is born

Also in late March Infineon Technologies AG unveiled plans to list its loss-making memory chip unit on the Nasdaq exchange. The unit is to be given one of those intriguing neologistic names - Qimonda. It will employ 12,000 workers globally and be headquartered in Munich. Qimonda will be the fourth-largest maker of DRAMs with sales last year of €122 m (US$148 m). It will be a legal entity as an Aktiengesellschaft (AG) but for the initial period stay a wholly-owned subsidiary of Infineon prior to an Initial Public Offering (IPO) as Qimonda.

Apparently, the name Qimonda 'implies the free flow of energy in the world'. It is the latest in an industry trend for synthetic names which give few clues as to what type of products the company makes. Cynics in the industry deplore such appellation preferring something more straightforward. Yet it is a logical continuation for this business since it has origins in one of the first such new-style names, Infineon (a synthetic word which combines the English "infinity" and the ancient Greek "eon").

Unaxis sell-off

Finally, the Swiss technology group Unaxis Holding AG is going to proceed with selling off of its semiconductor equipment segment. Though timing is uncertain, it is expected to yield SFr600 m, its CEO Thomas Limberger said at a press conference in Zurich. The semiconductor division had seen much better business last year but 1H05 losses caused an EBIT loss of $24.6 m for the full year. At the time of writing there was no hint as to prospective buyers.