Briefing: Siemens : The benefits of ubiquity

24 March 2006
There can be few people in the world who have not heard of Germany's Siemens. With total annual sales exceeding Eur 75,000 million ($91,500 million), more than 460,000 employees and five main business groups ranging from power generation to medical equipment and lighting, the chances are that nearly everyone has used or benefited from one of the company's products or applications in the 150 years since it was founded in a small Berlin workshop.

Europe - especially Germany - remains the dominant market for the company, with more than 50 per cent of its sales generated from the continent. But the Middle East, and the Gulf region in particular, has become an increasingly important growth area.

Revenues from the region last year grew by 70 per cent to $1,800 million as the firm took advantage of the petrodollar-fuelled infrastructure boom that saw it win several headline-grabbing power generation and distribution deals, as well as make headway into the medical services, security network solutions and transport automation sectors.

'The Middle East is a very important region for us,' says Siemens global president and chief executive officer (CEO) Klaus Kleinfeld. 'It's very fast growing, and with so many infrastructure build-outs here it is of significant interest. I'm not sure if it is really the same place as it was. The last time I was here in the early 1990s, I could swim in the sea all by myself. The pace of growth is tremendous and I find it really fascinating what it is going through. I tell the folks internally here to chase the cranes.'

Siemens believes it is well positioned to take advantage of the numerous opportunities now cropping up in the region. It opened its first office in Egypt at the turn of the 20th century, and has been operating in Saudi Arabia for more than 70 years. More recently in 1999, it set up base in the UAE to look after the lower Gulf market, before the current boom began.

'Coming here [to the UAE] six years ago meant we prepared for the boom,' says CEO of Siemens, Dubai-based lower Gulf operation Peter Fuchs. 'This has given us an advantage, as we already have a relationship with the customer and the customer knows our products well.'

Siemens places considerable emphasis on its diverse mix of business groups and its ability to provide comprehensive business solutions as governments seek to modernise their infrastructure. 'All of our business groups can grow because they all fit together,' says Fuchs. 'If you take Dubailand, they need infrastructure starting with power and distribution, they need communications systems, they need traffic control systems such as traffic lights and they also need automation and control, so everything that's happening with these major projects we can provide.'

The indications are that 2006 will be another bumper year. It recently signed a memorandum of understanding (MoU) with Emirates Telecommunications Corporation (Etisalat), giving it preferred supplier status for future overseas expansion projects, won a number of new substation contracts in Kuwait, Saudi Arabia and Qatar and is bidding with developers for the four independent water and power projects (IWPPs) in the GCC now out to tender.

Managing this growth will be no easy task, especially given the growing competition and increase in supply costs. Like other engineering, procurement and construction (EPC) contractors in the power generation sector - its largest regional business group by value - Siemens has seen costs rise and margins tighten. 'Generally we bid competitively, but demand is very high and there have been price increases from suppliers and some capacity problems,' says Fuchs. 'We are not able to compete for each and every job, so we take care to make sure that each project makes sense for us from a competitive point of view.

'So, we select a project where we can get the right partners. The supplier shortlist is also an important

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