Monday, July 8, 2013

Investopedia: Siemens Definitely Slimming Down, But Execution Is The Big Unknown

German industrial conglomerate Siemens (NYSE:SI) has gotten a great deal more serious about streamlining its operations around those businesses and markets where management believes they have a long-term edge and appealing growth potential. With that, Nokia Siemens Networks is gone, Osram is about to be spun off, and other businesses like water treatment, baggage handling, and low voltage could be on the way out.

Siemens actually held pretty good share in these businesses, so the streamlining process doesn't really change the fact that Siemens is typically a leader in its chosen businesses. What still has to be proven is whether the company can significantly improve its execution and margins. Relative to many other global industrial conglomerates, Siemens has an unspectacular track record in margins, returns on capital, and free cash flow generation, and management needs to convince the Street that it can do better before the shares will garner a better multiple.

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