Siemens 2007 Annual Report Download - page 197

Management’s discussion and analysis 197
Management’s discussion and analysis
and the calculation of adjusted industrial net debt, see “Capital Structure.” Our
Fit42010 target range for the capital structure ratio is 0.8 – 1.0, which represents
an increase in current debt/income leverage taking into consideration the cash
infl ows and outfl ows related to SV and Dade Behring mentioned above. As a step
toward achieving this goal, we have announced plans to repurchase Siemens
shares over the next three years, up to a total of €10 billion. This share buy-back
program leads to stronger EPS growth in the years ahead, while maintaining our
fi nancial fl exibility.
To highlight the return on capital invested in Siemens, we have adopted a mea-
sure known as return on capital employed (ROCE), calculated as income from con-
tinuing operations (before interest) divided by net capital employed in continuing
operations. Our ROCE in fi scal 2007 was 12.7%. ROCE development in fi scal 2008
will be affected by a substantial increase in capital employed, stemming from
major acquisitions completed or announced in fi scal 2007. Our 2010 target range
for ROCE is 14 – 16%.
Investment in Sustainable Growth
We continually invest in sustainable growth by advancing our technology through
R&D, strengthening and streamlining our organization, and demonstrating cor-
porate responsibility.
R&D. In fi scal 2007 we invested 4.7% of our revenue in research and develop-
ment. Approximately 70% of this €3.4 billion investment was aligned with our
three largest and most profi table Groups: A&D, PG and Med. The pace of technol-
ogy evolution in their respective industries is swift, requiring continuous innova-
tion. In fi scal 2008 and fi scal 2009, we expect to increase R&D spending compared
to fi scal 2007.
New Organizational Structure. To make Siemens faster, less complex, and
more focused as a company, we have announced that we will implement a new
organizational structure in fi scal 2008. This structure will consist of three sec-
tors, each focused on a major growth engine of the global economy: industry,
energy, and healthcare. The industry sector will consist chiefl y of the businesses
now within A&D, I&S, SBT, TS and Osram. The energy sector will consist chiefl y
of the business now within PG and PTD. The healthcare sector will consist of the
businesses now within Med.
Each sector will be headed by a chief executive offi cer (CEO) with membership
on Siemens’ Managing Board. In addition, each sector will have a chief fi nancial
offi cer (CFO) reporting to the CFO of Siemens. Each division below the sector level
will be headed by a CEO who reports up to the sector CEO. In the same way, the
CEOs of each business unit within a division will report up to the division CEO. In
the same way as for the CEOs, a separate reporting line for the CFOs will be estab-
lished accordingly on the levels below the sectors. Announcement of the sector
CEOs is scheduled for the end of November 2007.
Our regional companies around the world will support the new structure by
allowing the global sector businesses a clear “right of way” in pursuing sustain-
able and profi table growth opportunities. All three sectors will be supported by
cross-sector organizations that provide IT services (SIS) and fi nancial services
(SFS).