Exec sheds light on Siemens Semi spin-off

Exec sheds light on Siemens Semi spin-off
MUNICH, Germany — Ulrich Schumacher, president and chief executive officer of Siemens AG's semiconductor division, said Tuesday (Nov. 10) that the "timing is excellent" for separating the money-losing group from its parent and moving towards an initial public offering of shares in a new company.

Schumacher explained more of Siemens' thinking about its plans, announced last week, to take its semiconductor group public, when he spoke after a chief executives' forum at the Electronica exhibition here.

"The spin-off should happen very fast, within the next three months, but then move towards an IPO at the end of 1999 or at the beginning of 2000," he said, referring to a plan to create Siemens Semiconductor as a wholly owned subsidiary company. Schumacher said the company would have a new name to emphasize its intended separation from Siemens. There were no particular names under consideration as yet, he said.

Schumacher said that the IPO would be conducted in stages over an extended period of time to maximize the value returned to Siemens. He said his preference would be to float the IPO on the U.S.-based NASDAQ market, but that there was pressure to go public in the German stock market.

"The first offering will be about 20 to 25 percent [of the value of the company] and then we will see how the market reacts," he said. "The immediate target is to go first to a minority [holding for Siemens AG]. First we get to 49 percent, but how big it is in the long run is unknown.

"The timing is excellent, apart from the starting point of a 1.2 billion Deutch Mark [$718 million] loss ," said Schumacher. "We have much of the bad market behind us, we have taken steps to close fabs."

As part of the move, the newly free company is contemplating partnerships or alliances that would help its DRAM business grow larger than its current 10 percent share of the worldwide market.

"The idea is not as silly as it sounds," Schumacher said, adding no decisions have been made. Published reports stating that the spun-off Siemens Semiconductor operations will then spinout its DRAM operation are not accurate, he said.

Schumacher said he has been contemplating the separation of the semiconductor division from Siemens for three years. During that time he said he had argued about the flexibility of independent semiconductor companies, and cited STMicroelectronics as an example, in presentations to the board of Siemens.

"For three years I have been pushing," Schumacher said. With hindsight, he said he would have liked to have made the move three or four years ago, ahead of the last boom market in the semiconductor market.

After the recent closure of Siemens' fabrication facility in North Tyneside, Scotland, Schumacher said the company's other major fabs and its joint-venture fabs were safe. That's particularly true of the company's flagship site in Dresden, Germany, he said, where Siemens makes 64-Mbit DRAMs and has a joint-venture pilot line with Motorola Inc. to run 300-mm wafers.

Asked whether Siemens would renew dumping complaints with the European Union against memory suppliers from the Far East, Schumacher said: "There are so many obvious signals coming from the EU [European Union] that they don't want us to do so. I don't think we will file a complaint. Although Korea is a different case, to accuse the Japanese of dumping when they are reducing their [home] market share wouldn't be good."

The European Union has indicated in the past that pursuing dumping cases against Korean manufacturers and not Japanese manufacturers could be considered discriminatory.