Siemens AG is an electronics and electrical engineering company. The company is an integrated technology company with activities in the fields of industry, energy and healthcare. Siemens operates in six segments: Industry, Energy, Healthcare, and below the line segments composed of Equity Investments, Siemens IT Solutions and Services and Siemens Financial Services (SFS).
Siemens has changed its structure as of FY 2012 to Industry, Energy, Healthcare and the new Infrastructure & Cities segment. These segments are reported along with 14 divisions, recently restructured into 19 which comprise the divisions, Industry Automation, Drive Technologies, Customer Services, belonging to the Industry Sector, the Divisions, Fossil Power Generation, Wind Power, Solar & Hydro, Oil and Gas, Power Transmission and Energy Service, belonging to the Energy Sector and the Divisions, Imaging and Therapy, Clinical Products, Diagnostics and Customer Solutions belonging to the Healthcare Sector, and the Divisions, Rail Systems, Mobility and Logistics, Low and Medium Voltage, Smart Grid, Building Technologies as well as OSRAM (which has a planned listing for 2012) belonging to the Infrastructure & Cities. In this report, Siemens' analysis will be based on FY11's structure for a more accurate analysis.
The Electrical Equipment (or Capital Goods) sector has a small threat of new entrants because they are huge barriers of entry, like a large capital, specific experience and a tremendous know-how knowledge, the only possible threats would be small Emerging Market companies with low costs projects but that don't normally affect Siemens.
[...] a US company is only of Siemens Cost of Goods Sold, and it's the company with the biggest affect on - Siemens' account. This means Siemens has a much diversified supplier base, which is an advantage over its peers. Siemens does not have to be dependent on just a couple suppliers. Bargaining power of buyers: Siemens will face price pressure in the coming years. With the upcoming recession and the turmoil of the European crisis, Siemens' customers will probably have cuts in their budgets and so low prices are key for Siemens as the company needs to keep as much customers as possible. [...]
[...] Siemens is also being investigated on allegations that it bribed customers to win contracts. On top of that, Siemens is being investigated for corruption in at least 10 other countries. As a result, Siemens can face fines or may face exclusion from its bidding for contracts. These misleading acts can take a significant effect on future growth Another weakness of Siemens is that the company has a high dependence on third party providers, which can be subject to a slowdown in revenues. [...]
[...] The Emerging Markets at for for 2011 and for 2016, including the BRIC countries in which Siemens has an increasing presence (shown earlier). I've decided to input my long-run growth assumption to because Siemens' current market capitalization: 65.37 B Siemens is very well diversified globally and its growth should reflect its increasing share in the Emerging Markets (dotted lines). Cost of Equity ( 10.8 Betas (levered and unlevered): Siemens' inputted Beta is of which is the average of the 5 and 3 years Betas. [...]
[...] I have also based my decision on Siemens's “mid-term revenue target of Siemens forecasts an increase of 35% from in FY11 to €100B in the with a 25% growth in Industry in Energy in Healthcare and 20% in Infrastructure & Cities. I honestly do not believe 100B of revenues is a fair guidance before at least the end of the decade. Healthcare: Investments within the international healthcare markets are expected to increase by around 10% in 2011, following a rise of around in the year before. [...]
[...] From 2013 to 2016, a growth in net capex as a percentage of Revenues seems fair, as Siemens will keep investing in Emerging Markets. As the CFO reported, Capital expenditure will be mainly spent in Emerging Markets like Russia, as well as in the wind industry in developing economies. FORECAST INCOME STATEMENT OPEX: Due to price pressure I've concluded that an increase in Cost of Goods Sold would only be fair for the upcoming years. Actuals Year Revenues common size rate of change common size rate of change Gross Profit common size rate of change - -56,284 - -55,941 -48,977 -51,388 - -55,641 -58,119 - -60,190 - -63,840 - -65,755 Forecasts Year + Year + Year + Year + Year + Year + Assume pricing pressure This should result in a decrease in profit margin from in FY11 to in FY12, which I think will be a bit higher than during the 2008 crisis. [...]
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