Siemens 2009 Annual Report Download - page 189

101
quality new and existing products. Any inability to do so could
have a material adverse effect on our financial condition or
results of operations.
Our financial results and cash flows may be adversely af-
fected by continued strategic reorientations and cost-cut-
ting initiatives: We are in the process of strategic reorientation
and constantly perform cost-cutting initiatives, including
headcount reduction, for example, within our global SG&A
program or for the ongoing capacity adjustment measures and
structural initiatives, including measures in the Industry Sec-
tor. Capacity adjustments through consolidation of business
activities and manufacturing facilities, and the streamlining of
product portfolios are also part of these cost reduction efforts.
These measures may negatively impact our results of opera-
tions and cash flows. Any future contribution of these mea-
sures to our profitability will be influenced by the actual sav-
ings achieved and by our ability to sustain these ongoing
efforts.
Our financial results and cash flows may be adversely af-
fected by portfolio measures: Our strategy includes divesting
our interests in some business areas and strengthening others
through portfolio measures, including mergers and acquisi-
tions.
With respect to dispositions, we may not be able to divest
some of our activities as planned, and the divestitures we do
carry out could have a negative impact on our results of opera-
tions, our cash flow and, potentially, our reputation.
Mergers and acquisitions are inherently risky because of diffi-
culties that may arise when integrating people, operations,
technologies and products. There can be no assurance that
any of the businesses we acquire can be integrated success-
fully and as timely as originally planned or that they will per-
form well once integrated. In addition, we may incur signifi-
cant acquisition, administrative and other costs in connection
with these transactions, including costs related to integration
of acquired businesses. Furthermore, portfolio measures may
result in additional financing needs and adversely affect our
financial leverage and our debt-to-equity ratio. Acquisitions
may also lead to substantial increases in intangible assets, in-
cluding goodwill. Our balance sheet reflects a significant
amount of intangible assets, including goodwill. Among our
businesses, the largest amount of goodwill is allocated to the
Divisions Diagnostics and Imaging & IT of the Healthcare Sec-
tor, and Industry Automation of the Industry Sector. Among
these Divisions, Diagnostics has the highest amount of good-
will and the lowest excess of the recoverable amount over the
carrying amount, estimated at €2.284 billion based on the an-
nual impairment test in fiscal 2009. If we were to encounter
adverse business developments including negative effects on
our revenues, profits or on cash, or adverse effects from an in-
crease in the weighted average cost of capital (WACC) or from
foreign exchange rate risk or otherwise perform worse than
expected at acquisition, then these intangible assets, includ-
ing goodwill allocated to the Divisions Diagnostics, Building
Technologies, or other Divisions, might have to be written
down and could materially and adversely affect our results of
operations. The likelihood of such adverse business develop-
ments increases in times of difficult macroeconomic condi-
tions, such as experienced under the current global macroeco-
nomic and financial crisis.
We may be adversely affected by our equity interests and
strategic alliances: Our strategy includes strengthening our
business interests through joint ventures, associated compa-
nies and strategic alliances. Certain of our investments are ac-
counted for using the equity method, including, among oth-
ers, NSN, EN and BSH. Any factors negatively influencing the
profitability of our equity investments, including negative ef-
fects on revenues, profits or on cash, could have an adverse
effect on our equity pick-up related to these equity interests or
may result in a write-down of these investments. In addition,
our financial position and results of operations could also be
adversely affected in connection with loans, guarantees or
non-compliance with financial covenants related to these eq-
uity investments. Furthermore, such investments are inher-
ently risky as we may not be able to sufficiently influence busi-
ness decisions taken by our equity investments and strategic
alliances that may have a negative effect on our business. In
 Managing Board statements, Independent auditors’ report, Additional information
95 Net assets position 97 Report on post-balance sheet date events
98 Risk report
108 Information required pursuant to
§315 (4) HGB of the German Commercial
Code and explanatory report
114 Compensation report
114 Report on expected developments