Siemens 2006 Annual Report Download - page 103

Management’s discussion and analysis 99
Strategic overview
Siemens’ competitive strategy is to innovate through research and development (R&D),
improve its business portfolio to bring that innovation to market on a global basis, and back
these efforts with a strong, conservative financial condition.
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 both established and new regional markets. In fiscal 2006, 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 October 2005 (the first quarter of fiscal 2006), we expanded our offerings for clean pow-
er generation infrastructure with the acquisition of Wheelabrator Air Pollution Control Inc.
(Wheelabrator) in the U.S.
■In April 2006, we sold our Product Related Services (PRS) business unit to Fujitsu Siemens
Computers (Holding) BV (Fujitsu Siemens), our joint venture with Fujitsu Limited of Japan.
■In June 2006, we expanded our alternative energy portfolio by acquiring the coal gasifica-
tion business of the Swiss Sustec-Group, a leading provider of products and solutions for
clean conversion of coal to electricity.
■In June 2006, we announced an agreement to contribute our carrier networks business to
a joint venture with Nokia Corporation (Nokia). Closing for this transaction is expected for
the first half of fiscal 2007. Com’s carrier networks and its enterprise business are being
held for disposal.
■In June 2006, we announced an agreement to acquire the Diagnostics division of Bayer AG,
headquartered in the U.S. Upon closing, which is scheduled to occur in the first half of
fiscal 2007, we expect this transaction to significantly strengthen our position in molecular
diagnostics, a high-growth segment of the healthcare market.
■In July 2006, we entered a complementary segment of the medical diagnostics market by
acquiring Diagnostic Products Corporation (DPC) in the U.S., a leading provider of in vitro
immunodiagnostics solutions.
■In August 2006, we divested a significant portion of our Dematic business, which consisted
of nearly all of the distribution and industry logistics businesses carved out of L&A effec-
tive with the beginning of fiscal 2006.
We further improved our business portfolio in fiscal 2006 through smaller acquisitions
and divestments. For a detailed discussion of our acquisitions, dispositions and discontinued
operations, see “Notes to Consolidated Financial Statements.”
Siemens is one of the most global companies in the world. In fiscal 2006, international busi-
ness accounted for more than €70 billion in revenues, representing more than 80% of total
sales. In particular, we expanded our business in the Americas and Asia-Pacific at more than
twice the rate of growth in gross domestic product (GDP) of these regions, highlighted by
strong demand for our solutions in the U.S., India and China. In the Middle East, we also grew
beyond the region’s gross domestic product, fueled by infrastructure investments of oil-pro-
ducing nations. Siemens operates in approximately 190 countries, enabling us to bring our
offerings to customers throughout the world.
We maintain a strong, conservative financial position, close management of net working
capital, and transparency for the financial and investment communities. For example, the
acquisitions mentioned above entailed significant cash outflows in fiscal 2006, yet our equity
ratio remained above 30%. In addition, we have significantly strengthened our pension plans
in recent years through regular annual contributions and substantial supplemental contribu-
tions.
Management’s discussion and analysis