Don't discount the Siemens factor

by David Rohde

March 9, 2001 —

Next Monday might be just the beginning of another busy workweek for most folks in the networking and telecommunications business. But for German giant Siemens and especially its American units in the communications field, it's a day they've been looking forward to for years.

If all remains according to plan, on Monday the stock of Siemens will list on the New York Stock Exchange, completing a transformation the company set out in 1998 to achieve. Siemens is a tremendous player in European markets, not only for networking products but also in power generation, transportation and logistics. But it has kind of a fuzzy image in North America.

Numbers alone don't explain why Siemens never gets mentioned even in the same vicinity as Cisco, Nortel or Lucent in the U.S. It's actually the long-time No. 3 PBX and call center equipment vendor here (though, tellingly, you might better recognize its former PBX brand name, Rolm). And its Unisphere affiliate, formed a couple of years ago, actively plays in the network-edge switch/router market for service providers. In fact, counting all its businesses, Siemens actually had greater sales during 2000 in the U.S. than in Germany for the first time.

But Siemens hasn't made the flashy U.S. acquisitions like its European brethren, such as France's Alcatel (which among other things bought Newbridge, ironically a long-time Siemens partner). Siemens officials have always attributed this to the company's financial structure. Until the fourth quarter of 2000, Siemens' accounting did not conform with U.S.-standard generally accepted accounting practices, or GAAP in financial parlance. Once they achieved GAAP, Siemens officials always promised, they would go on to list American Depositary Receipts on the NYSE and could begin to use the stock as currency for acquisitions. Siemens stock should open strong in the U.S. due to its fine run in Europe, having increased 3 1/2-fold since mid-1998 even after a recent dip.

Now it's true that both Siemens and Unisphere have made some U.S. acquisitions, but they've tended to be relatively specialized and made for cash rather than stock. A recent one does merit mention: Last month Siemens announced it would buy DSL modem maker Efficient Networks for $1.5 billion in cash. Efficient actually makes a variety of DSL-related CPE for residential and small-office locations, including single-user and multi-user modems and routers as well as integrated-access devices. That's a market under a lot of price pressure and perhaps headed for commoditization. But the Efficient purchase does give Siemens entr

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