Siemens 2005 Annual Report Download - page 91

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Strategic overview
Siemens’ competitive strategy is to innovate through research and development (R&D), optimize
its business portfolio to bring that innovation to market on a global basis, and back these efforts
with a strong, conservative financial condition.
Siemens is one of the most innovative companies in the world, holding more than 53,000
patents worldwide as well as numerous patent exchange and licensing agreements. Based on
patent statistics, Siemens is number one in Germany, number two in Europe, and among the top
ten in the U.S. To remain innovative, we invested €5.155 billion in R&D, even more than the
€4.650 billion in fiscal 2004.
We continually balance our business portfolio to maintain our leadership in established
markets while penetrating new markets. In some cases this involves acquiring complementary
technology that enables us to offer more complete solutions. We also use acquisitions to gain
scale in new regions. In fiscal 2005, we pursued both strategies, and also exited or reduced our
participation in markets where our competitive position did not enable us to achieve growth or
profitability goals. Major transactions included the following:
■In December 2004 (the first quarter of fiscal 2005), we entered the fast-growing alternative
energy market by acquiring a wind power company, Bonus Energy A/S (Bonus) in Denmark.
■In May 2005, we expanded our position in the growing field of molecular imaging by
acquiring CTI Molecular Imaging, Inc. (CTI) in the U.S.
■In July 2005, we strengthened our existing industrial automation portfolio by acquiring
Flender Holding GmbH (Flender), a German-based industrial gear manufacturer, and Robicon
Corporation (Robicon), a U.S.-based maker of voltage converters for industrial motors.
■In July 2005, we completed the acquisition of VA Technologie AG (VA Tech) of Austria to
enhance business opportunities in power transmission and distribution and in industrial
engineering.
■In September 2005, we sold our mobile devices business, which lacked the necessary scale to
compete effectively in a consolidating market. These business activities are reported in dis-
continued operations for both the current and prior periods.
We further optimized our business portfolio in fiscal 2005 through a number of smaller acqui-
sitions and divestments. For a detailed discussion of our acquisitions, dispositions and discontin-
ued operations, see “Notes to Consolidated Financial Statements.”
Siemens is one of the most global companies in the world. In fiscal 2005, international busi-
ness accounted for nearly €60 billion in revenues, representing approximately 80% of total sales.
In particular, we expanded our business in the Americas and Asia-Pacific at more than twice the
gross domestic product (GDP), highlighted by strong demand for our solutions in the U.S. and
China. Siemens operates in approximately 190 countries, enabling us to bring our offerings to
customers throughout the world.
We maintain a strong, conservative financial position, careful management of net working
capital, and transparency for the financial and investment communities. For example, the acqui-
sitions mentioned above entailed significant cash outflows in fiscal 2005, yet our equity ratio
remained above 30%. In addition, we have significantly strengthened our pension plans in recent
years through substantial supplemental contributions.
Management’s discussion and analysis
Consolidated Financial Statements Notes to Consolidated Financial Statements