Siemens AG (SI) was awarded a contract by Houston METRO to build and deliver nineteen S70 light rail trains inclusive of spare parts and training manuals. The order is valued at $83 million and will take the total number of trains supplied to Houston to 37.
Siemens was the turnkey conractor for Houston METRO’s 7.5 mile starter line, which opened in Jan 2004.
The new rail cars are scheduled for delivery beginning in October 2012. The S70 has a maximum speed of 66 miles per hour.
Siemens is a global leader in most of its key businesses, including industrial automation, power generation, medical equipment and transportation. Given its product breadth and geographical diversity, the company should be a major beneficiary of increased spending as developing nations build their infrastructure.
Its core businesses have seen a pick-up in demand and the company is well positioned in areas such as Brazil, Russia, India and China, where growth is brisk.
Its first competitive strength lies in emerging markets. In the first half of 2010, 30% of businesses were in the emerging markets, which compares to 19% during the downturn of 2001. The company has built out its headcount in low-cost countries. In 2001, it was only 14% of its global headcount base.
Today, it is 25%. It is increasing not just its physical presence from a distribution and marketing standpoint, but also its manufacturing footprint, allowing it to optimize its global cost structures from a global supply chain standpoint. Roughly 20% of its global sourcing requirements are coming out of low-cost countries.
Global macroeconomic and financing conditions continue to reduce consumer spending, business confidence and capital expenditures. This was particularly evident in such short-cycle industries as automotive, manufacturing and lighting. Longer-cycle energy and infrastructure customers postponed potential new business.
Siemens AG is a German industrial conglomerate. With a focus on electronics and electrical engineering, the company is a major multinational with over 405,000 employees in more than 190 countries. ABB Ltd (ABB) is a major competitor.
We currently have a Neutral recommendation on Siemens.
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