In a blockbuster announcement, Siemens AG President and CEO Klaus Kleinfeld disclosed that he has decided to step down. Amid a bribery investigation dogging the Germany-based automation giant, Kleinfeld said he will not be available for contract renewal, which had been due to take place later this year.
On a conference call today with analysts to discuss the company's second-quarter results, Kleinfeld said his resignation is the result of the decision by Siemens' Supervisory Board to postpone his contract renewal. The board is conducting its own investigation into bribery charges, brought by German prosecutors, that have plagued the company and mushroomed into an ever-widening probe. As a result of that scandal, Supervisory Board Chairman Heinrich v. Pierer announced last week that he would vacate his position. Both Pierer and Kleinfeld have denied any involvement in the alleged malfeasance.
"I believe, in this day and age, employees, customers, as well as shareholders expect strong leadership, particularly in situations like the one Siemens is in," Kleinfeld said in his opening remarks today. "The current discussions [around] the future of Siemens cause concern internally and externally. The [new Supervisory] Chairman informed me that they have postponed a decision on my contract renewal, and I consider this lack of clarity regarding company management and my own mandate to be burdensome and unacceptable to the company and employees. For that reason, I will no longer be available for extension of my contract."
Kleinfeld has agreed to remain at his post through Sept. 30, 2007. How much involvement he will have with the company over the next several months is unclear.
Yet even amid the investigations, Siemens managed to post strong fiscal second-quarter results, with revenue up 10% year over year to €20.6 billion.
In the quarter ended March 31, net income rose even more markedly, climbing 36% year over year to €1.26 billion. Earnings per share surged to €1.34 from the €0.98 reported in the year-prior period.
Siemens was one of three automation giants announcing earnings today, as ABB and Rockwell Automation also reported their quarterly financials.
In its first fiscal quarter, ABB more than doubled its net income, reporting earnings of $538 million on sales of $6 billion, up from net income of $204 million on sales of $5.1 billion in last year's first quarter.
According to ABB CEO Fred Kindle, all five of the company's divisions performed well. He singled out the Power Products and Power Systems Groups as generating the most orders, noting that emerging regions of Asia and South America are building out power networks, while more mature markets, such as Europe and North America, are upgrading aging infrastructures.
In a briefing with analysts today, Kindle said the Americas showed the strongest increase in orders this quarter for ABB, with a 24% rise year over year, based on constant currencies.
Interestingly, North America was the weakest market for ABB competitor Rockwell Automation, which also revealed its quarterly earnings today.
Excluding gains from the divestiture of its Power Systems business, Rockwell's fiscal second-quarter results were fairly flat. Net income for the period ended March 31 totaled $142.3 million on revenue of $1.2 billion, compared to $150.9 million on sales of $1.12 billion a year ago.
A point of pride for Rockwell in the quarter were its Logix controller sales, which grew by 18%. During an analyst briefing in January to announce Rockwell's first-quarter results, Rockwell CEO Keith Nosbusch said he was not satisfied with the growth of Logix. Sales growth for the product in the first quarter was 11%, far below the company's goal of 20% growth for Logix. Nevertheless, overall revenue was deflated by the performance of legacy PLC products, which experienced a 14% drop in sales.
The biggest negative driver was the "zero growth in North America," a market that accounts for 54% of overall sales, Nosbusch said. But he also said North American sales are heading for a turnaround.
"We need to continue to execute on growth initiatives to broaden and diversify applications and the industries we serve. That is an important strategy," Nosbusch said in an interview with Managing Automation.