German technology and industrial giant Siemens announced, this week, a plan to spin off its struggling energy division, which it will merge with a different—and separate—listed wind turbine supplier Siemens Gamesa Renewable Energy (SGRE) in order to create a new, multi-technology energy conglomerate on a global scale. This new energy company will offer a diverse portfolio ranging from oil to gas-based energy solutions as well as gas and steam turbines, both on- and offshore wind turbines, and even transmission equipment.
Siemens expects the new company could employ about 80,000 people, generating annual revenues upwards of $33.6 billion. Of course, SGRE is the largest wind turbines supplier in the world, behind only to Vestas (of Europe) and Goldwind (of China). Still, SGRE is only about two years old, created out of Siemen’s wind business and the Spanish wind company Gamesa.
According to Siemens President and CEO Joe Kaeser, “Combining our portfolio for conventional power generation with power supply from renewable energies will enable us to fully meet customer demand. It will also allow us to provide an optimized and, when necessary combined range of offerings from a single source.”
Kaeser goes on to say, “These changes are laying the foundation for sustainable economic success in growth markets that will be attractive over the long term. We’re also creating solid perspectives for those businesses that have to prove themselves in the structural transformation now underway and address new growth fields.”
It should be noted that net profit for Siemens went from 2.02 billion euros last year to 1.92 billion euros this year. Last year, the earnings got a boost from 900 million euros, via share transfer. However, revenues improved 4 percent, to 20.93 billion euros. Shares jumped 4 percent, though, on the spin-off announcement.
Kaeser confides that the success of this business, in the next generation, will be determined by a handful of new factors. These factors will include focus, speed, and adaptability; replacing their somewhat archaic previous strategies of breadth, size, and a “one-size-fits-all approach.”
In fact, he asserts “That’s how we’ll ensure sustainable success of our businesses in the age of the digital Fourth Industrial Revolution, in which these new factors are a crucial to compete.”