An attempt of Siemens Mobile to save face or … refusal from the business

Much information concerning Siemens Mobile was one of the reasons to write this article. The company that promised to comment «mistaken opinions» of our site «in the near future» couldn’t do it. May be employees we corresponded with are not responsible for these items now. We will be glad to receive few comments from Siemens to make the situation clearer and we are ready to give place for their response on our site.

The second and the main reason to write this article was the following. Every year in the beginning of October there is a stock exchange speculation connected with Siemens. Two last years there were rumors about joining of Siemens and Motorola, then, they were just stopped. Those, who spread rumours were very careful and put several publications in the key editions, which had high index of quotation. Then, the reaction resembled a snowball; different versions of such joining were described and estimated. You can read one of our last year’s articles about that situation. Now we’ll try to understand who gets profit from these rumours and why.

Lately there was a mess with heads of Siemens Mobile. They replaced each other very quickly. Now the third person is holding this post. Perhaps he will be replaced in March 2004, when the company announces about its anticrisis policy and needs retirements. It’s not very important whether it happens after or before CeBIT. The main idea is that the company understands that it needs active actions.

New models, lag from rivals

Today Siemens is continuing to lose its GSM-terminals market share. There are well-grounded presumptions that in the end of 2004 Siemens will occupy only the 5-th place, not the 4-th one as it takes today. During the last months Siemens constantly postpones launching of new products. It also couldn’t unveil hit models in the segments. We do not think that there will be improvements in the future. New model range will only slow the fall but won’t stop it. Specifications of new x65 phones show that these handsets will not have any principle new functions; price policy will remain the same. The company stakes on S65 in the business segment, but it won’t have any particular features for the model of 2004. Among typical functions we could mark out 32-tones polyphony, STN-65K-color screen and integrated VGA camera. There are discussions about a possibility to record small video clips. Realization of this function depends on memory space. There are rumours that the phone will equip with 8-9 Mb memory pool. Now it seems to be too much but Samsung integrates such kind of memory pools in today’s models.

It’s a tradition to compare products from Siemens and Sony Ericsson, for example Siemens S55 and Sony Ericsson T68i. Siemens wins this comparison, because it has a more new product, it appeared later on the market. On the other hand Siemens S55 is not so popular and functionally advanced as Sony Ericsson T610. After a period of time Siemens S65 will win the race over Sony Ericsson T610, T620. But do not forget that in the end of March Sony Ericsson will begin shipments of T630, which will integrate several new functions, a larger memory pool, 1-Megapixel camera and have the same housing as T610 (may be it will be a little bit thicker). Considerable improvements could be found in the interface, some of them you could see in P900, original melodies in particular. They are very simple but sound unusual. For example, first, you can hear the women’s voice, which asks: “Hello, is anyone there?”, after that sounds a melody. Release date of T630 and S65 has two months difference; Sony Ericsson’s product will come to market later. But it would cause price slump for Siemens S65. The company couldn’t sell it gaining the same profit. The company couldn’t be able to prepare a revised model until autumn and by that time rivals would have new products. We gave this example to show that Siemens began to delay with new models developments.

About 7 models will be based on new x65 platform will be unveiled. It’s easy to guess that today’s situation will be repeated. We could for sure speak about phones of the middle class segment (M65, C65, MC65 – C65 without camera). A low-end phone will be the same as not long ago unveiled C62, i.e. A65 will be a copy of this model. Launching of new youth model with a QWERTY-keypad in the second half of the year will depend from its predecessor, which would be announced in October this year. We think that it will be a niche product that won’t have influence on total amount of the company’s sales.

Besides, now Siemens is going to have about 6 ODM-phones in 2004. The company tries to compensate shortcomings of its product range unveiling models developed by other manufacturers. In this case Siemens uses trademark awareness and the fact that many end users do not know who in reality manufactured the model.

Problems with ODM-manufacturers

The experience of Siemens in response of cooperation with ODM-manufacturers is not rich: Xelibri line and two models produced by Taiwan company Quanta. In case of Xelibri the most important thing is design, not functionality. So, the company doesn’t have any strict requirements towards the partner. It is necessary to keep assembling quality (rejects share in reality) and use high-quality materials. All these problems can be easily solved and the company won’t have problems producing such products.

Usual phones are another matter. They should be competitive and have an excellent assembling quality and advanced functionality. It is not so easy to find partners to produce such models. Not large amount of companies have developments in this field. As a rule they are direct rivals to Siemens. It is possible to get a stable hardware without top functions and capabilities. Large company in one country couldn’t have own research labs compatible with Nokia, Motorola, Sony Ericsson, Philips, which are strong transnational companies. So, the outlet is not obvious, on the one hand, Siemens lost its chance to solve the problem without assistance, on the other hand, nobody is going to help.

Moreover, even current partners can refuse from the cooperation. Private talk with Taiwan manufacturers showed their unwillingness to work with Siemens. You can believe or not, but soon Quanta could stop to produce ODM-models for Siemens. The cooperation of these companies intended not only production of phones for Siemens but Quanta should have received intangible assets of the company (development experience, improving, elaborations in design). The company tried to learn how it could reach the higher level of the manufacturing. Unofficially these thoughts were verified, but in fact Quanta didn’t receive any help from this cooperation, though it should implement the agreement. Reputation of the company was compromised and it would be much more complicated to find other partners. Certainly, companies, which will decide to risk will be found. And Siemens could strengthen its positions due to niche products in 2004. ODM-phones couldn’t become mass offers in the line and sell as own models. Now Siemens repels potential partners, which could partly strengthen positions on the market.

We are joining…

Let’s turn to rumours of “joining” of Siemens and some other manufacturer we began with. We couldn’t find who begins to spread these rumours and find evidences appropriate for prosecution. Let’s just think together and try to find the easiest solution.

In the end of September German newspaper "Handelsblatt" published one article, where there is information that Siemens tries to save it face while losing market share. One of the opportunities named there was to sell Siemens Mobile department which dealt with mobile terminals production. It is said that last year there were negations with Motorola but they didn’t reach an agreement. It’s obvious that the same story won’t be so interesting one more time, and new details are added there. Now Motorola is only a fact from the past to make the story more reliable.

Now among possible buyers such companies as LG and NEC are mentioned. This choice is not occasional. Both manufacturers have tried to invade European market, but have been not very successful. It’s indicated that one of the main conditions of selling the company is saving of Siemens brand. It crossed out all profits from a potential bargain and gaining “larger” European market share. Why we put quotes? Because there is an experience of Sony Ericsson, which reduced its market share after joining, compared to the share of two separate companies Sony and Ericsson. Rivals just took the opportunity and occupied part of the market share. We could see the same picture in case of joining Siemens and other companies. It’s better to say that we couldn’t see it as it just rumors to attract attention.

NEC has the other policy. The company is going to play considerable role on the European market but in the field of 3G-phones. It has the strongest positions there. The company is not interested in selling terminals for existed networks. Those who invented the story didn’t consider that usual people know well aims of NEC.

In case of LG it’s not so easy. Buying the company LG gives a double name to the enterprise or named it as LG. The company didn’t want to grow sales without strengthening its brand, this latter task is the task of the highest priority. The company couldn’t reach it if save Siemens brand. LG won’t pay for strengthening of not own trademark, so it can’t be a real candidate for purchasing the company.

It’s interesting that some of top managers from Siemens Mobile offer Asiatic partners to buy the department. It was said as a joke, not seriously. But Asian companies calculated consequences of such purchasing because the joke came from the very high level. If this talk is not just a rumor, we could presume that Siemens tries to prepare to various situations. The rumour about selling Siemens is a typical and planned action. Most likely that the country where these rumours are occurred is Germany. The other fact is that usually these it is rumored about Siemens and some other players which could be changed. We have an impression that all this fuss is aimed to Siemens.

You could say that all these rumours only affect the company. On the other hand it’s not so obvious. Discussion of the company aroused interest to it. All false rumours only show the strength of the company and it seemed to be more stable after crisis. The fact that the crisis was created by the company itself meant nothing.

Keep in mind that all presumptions made above are just our thoughts. We have no direct evidences to prove them. Let’s wait and see how the situation will develop. I think that even this week we’ll see publications concerning this item.

Published — 8 September 2003

Have something to add?! Write us... eldar@mobile-review.com

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