Siemens to Engineer IPO for Osram this Fall

Siemens AG, Munich, Germany, plans to publicly list its lighting subsidiary Osram GmbH in fall of 2011. The parent company intends to retain a minority stake in Osram, in which it will remain a long-term anchor shareholder. “With the IPO, we want to give Osram complete entrepreneurial freedom to comprehensively further develop its leading competitive position in a lighting market being swept by technological changes,” said Siemens President and CEO Peter Löscher. Siemens also wants to participate in future growth in the market for new lighting technologies.

At least one investment analyst believes Siemens wants out of the lighting market because lamps will become more commoditized in the future. In a recent Bloomberg report, James Stettler, an analyst at UniCredit in London, is quoted as saying, “The lighting industry faces huge changes. China is subsidizing local manufacturers and the business will eventually be commoditized. It makes sense to exit Osram to avoid getting out too late.”

Reaction to the IPO is mixed. Some investment community analysts have speculated in published wire service reports that the move is another example of the overhaul Siemens CEO Peter Loescher is engineering to improve earnings, refine the company's operations and improve its image after the 2008 bribery scandal forced it to pay approximately $1.6 billion in fines to U.S. and European authorities. But while some analysts in the investment community believe an IPO might be the first step of a gradual exit from the lighting market for Siemens, at least one lighting market veteran, along with information gleaned from Siemens' financial statements, paint an entirely different picture.

Siemens said in a 2010 financial review posted on its website that profits at Osram improved “more substantially” year-over-year than at any of the other divisions within its Industry business segment and that Osram's revenue had grown at a double-digit rate over 2009. The company also said its Osram Opto Semiconductors subsidiary is currently building “the world's first pilot production line for organic LEDs (OLEDs) in Regensburg, Germany.” OLEDs are a light source that incorporate LEDs on flexible substrates.

Bill Attardi, president, Attardi Marketing Services, Colts Neck, N.J., and for years a Philips executive, believes Siemens would use an IPO to invest in Osram, and possibly to acquire a large fixture manufacturer so it could offer a full package of lamps, ballasts and fixtures. Osram's package historically has not focused as heavily on fixtures, although the company recently acquired Siteco, a German fixture manufacturer.

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