Siemens Government Services, a division of Siemens AG (SI), has bagged a $38.5 million order from General Services Administration in USA. The scope of work includes improving energy efficiency in 39 government facilities spread across the Greater Southwest Region.
The 26-month contract period will see Siemens deliver renewable energy as well as build automation systems, which include photovoltaic generating technologies and sophisticated heating, ventilation and air conditioning equipment.
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 up their infrastructure. Its core businesses have seen a pickup in demand and the company is well positioned in Brazil, Russia, India and China, where growth is the fastest.
Its first competitive strength lies in the 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, as well as cost of goods sold. Roughly 20% of its global sourcing requirements are coming from low-cost countries.
Global macroeconomic and financing conditions continue to reduce consumer spending, business confidence and capital expenditures in the second quarter. This was particularly evident in such short-cycle industries as automotive, manufacturing and lighting. Longer-cycle energy and infrastructure customers postponed potential new business. Health care orders rose, due mainly to positive currency translation effects, while Industry and Energy saw reduced order intake in most divisions.
On a geographic basis, orders declined significantly in Europe/CAME and the Americas. The Industry segment experienced a significant impact from the macroeconomic environment. This was particularly evident at Industry Automation, Drive Technologies and OSRAM, where cost-reduction measures are still ramping up.
Siemens AG is a German industrial conglomerate with interests in information services, automation and controls, medical equipment, power generation, transportation systems, automotive electronics, lighting and other areas.
We currently have a Neutral recommendation on Siemens AG.
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