Siemens Q1 sales rise but profits dip due to fine

German electrical and electronics manufacturer Siemens saw revenue rise for its most recent quarter but net income tumble due to a European Union fine for price fixing.

The price-fixing fine in its electrical power business and, in particular, an ongoing bribery investigation in its telecommunications equipment division have rocked the 160-year-old Munich company, which is in the throes of a major reorganization.

Net revenue in Siemens’ first quarter rose 6 percent to €19.07 billion ($24.80 billion) on Dec. 31, the last day in the period being reported, from €17.98 billion, the company said Thursday.

First-quarter net income fell to €788 million from €939 million in the same period a year earlier. Siemens attributes the drop to a €423 million charge for the E.U. fine.

“We got off to a strong start in our first quarter but the E.U. fine has had a negative effect on our earnings,” said Siemens Chief Financial Officer Klaus Kleinfeld in a webcast with analysts.

The manufacturer was fined on Wednesday by the European Commission, the E.U.’s antitrust regulator, for fixing the price of equipment used to deliver and control electricity flow.

Siemens Business Services (SBS), the IT services arm that is being merged into the new, larger Siemens IT Solutions and Services division, posted a first-quarter profit of €24 million, compared to a loss of €232 million.

At the start of the year, a consortium led by SBS and IBM was awarded a 10-year contract, worth €7.1 billion, to modernize and manage the information and communications technology of the German Federal Armed Forces

The two companies will own 50.1 percent in BWI Informationstechnik, a new company set up to supply the IT services. The German federal government will own the rest. The venture is currently the largest public-private partnership in Europe, according to Siemens.

SBS, the IT services subsidiary of the German engineering and electronics giant, will modernize and operate a huge fleet of IT systems, including 140,000 PCs, 7,000 servers, 300,000 fixed-line phones, and 15,000 cell phones at more than 1,500 locations in Germany. The company will also be responsible for managing the army’s local and wide-area data networks in addition to its dedicated voice networks.

Kleinfeld expects the planned network venture with Nokia to begin operating in the second quarter.

Last year, Siemens and Nokia agreed to merge their network infrastructure manufacturing activities into a new venture, Nokia Siemens Networks. But the start of the venture was delayed due to the Siemens probe.

The German company has been shaken by a bribery scandal involving six current or former Siemens executives, including Thomas Ganswindt, the ex-head of the group’s telecommunications equipment unit, who are suspected of setting up secret funds outside Germany.

Since taking over as chief executive officer of Siemens, Klaus Kleinfeld has shifted the focus of the German engineering giant away from low-margin manufacturing areas, such as telecommunications equipment, computers and chips, to areas he views as potentially more profitable, including factory automation, power generation, and automotive systems.

In that vein, Siemens announced Thursday plans to buy PLM (product lifecycle management) software developer UGS for $3.5 billion, allowing it to offer customers all-digital manufacturing systems from the drawing board to the factory gate.