Siemens Aktiengesellschaft
Q2 2014 Earnings Call Transcript

Published: 7 May 2014

Executives:

Mariel Von Drathen - Non Executive Director and Member of Remuneration Committee Josef Kaeser - Chief Executive Officer, President, Member of the Managing Board and Member of Equity & Employee Stock Committee Ralf P. Thomas - Chief Financial Officer, Member of The Managing Board, Executive Vice-President and Member of Equity & Employee Stock Committee Stephan Heimbach - Head of Communication
Analysts:

Ben Uglow - Morgan Stanley, Research Division James Stettler - Barclays Capital, Research Division Andreas P. Willi - JP Morgan Chase & Co, Research Division Martin Wilkie - Deutsche Bank AG, Research Division Michael Hagmann - HSBC, Research Division Olivier Esnou - Exane BNP Paribas, Research Division Simon Toennessen - Crédit Suisse AG, Research Division Alfred Glaser - Oddo Securities, Research Division Fredric Stahl - UBS Investment Bank, Research Division William Mackie - Berenberg, Research Division James Moore - Redburn Partners LLP, Research Division
Mariel Von Drathen:

Ladies and gentlemen, welcome from all of us to Siemens Semiannual Press Conference. This time, it's being combined for the first time for the analysts and the media. We're pleased that so many of you have come here today. Today, Siemens CEO, Joe Kaeser; and Siemens CFO, Ralf Thomas, will be giving you the figures for the second quarter and will be explaining the strategy for the company for the years to come. Let me make a few housekeeping announcements first. I would like to request that all of you switch off your cell phones or put them at least on the silent mode. I would also like to request that the photographers should not use a flash during the event. We have English interpretation for the press conference and the analyst conference. There are headsets available for you on your chairs. And if you like, there will also be interpretation back into German. Our conference will be broadcast on the Internet, and you can find all of the relevant documents on the Internet. Following today's more detailed explanations from Mr. Kaeser and Mr. Thomas, both of these gentlemen will be available to take your questions. We will break up the question-and-answer sessions into 2 different blocks. The first part will be in English until about 10
Josef Kaeser:

Thank you very much, Marianna. Ladies and gentlemen, good morning, and welcome you to the Mosaic Hall here in Berlin. It's a very traditional venue for Siemens. I think some of you have said that Siemens is going back to the future. Maybe that's what you meant. I'd like to welcome all of you who are viewing us over the Internet. I'm especially pleased to see that both the analysts and the journalists are here together today. And this is a question of a common dialogue to have the information at the same time and at the same place. I'd like to give you some detailed information on our new strategic orientation. After which, Mr. Thomas will be giving you some of the key developments of the second quarter. It will take a bit longer than usual today. We have enough material for 3 or 4 press conferences, but I'll try to be as concise as possible and present you with the most important information. It was over 9 months ago that I assumed the office of CEO at Siemens. At that time, there was a lot of turmoil in the company. Many actions were designed to achieve short-term improvements, and they were tactical in nature. The long-term perspective was missing. At that time, we -- or I said in August, Siemens must again come first at Siemens. All of us will submit to that principle, from the CEO to the trainee. That is the key to success. I also pointed out that we must restore the internal order of the company, in other words, discipline, and that we must again get closer to our customers. At the Annual Shareholders' Meeting in January 2014, I emphasized that we would be leading the company more stringently and in flatter hierarchies. I also added that our commitment to being a leading company and that we would develop along the value chain of electrification and automation and manifest itself in the utilization of the opportunities presented by digitization. That would enable the company to close profitability gaps in the long term and reduce them in the short term. Today, I will present how the company's strategy and structure will enable us to meet this commitment. Before I do that, however, Mr. Thomas will briefly review the key figures for the second quarter, and he will outline the measures urgently needed to improve project execution. Go ahead.
Ralf P. Thomas:

Ladies and gentlemen, I, too, would like to welcome you here in Berlin. I'd like to provide you with a compact overview of our second quarter results, which I would generally describe as mixed due to substantial onetime charges stemming primarily from project business. A quick look at the key figures shows that new orders clearly dropped relative to the extraordinarily strong previous year due to the decline in major orders in our Wind and Rail businesses. Nevertheless, the book-to-bill ratio remained positive at 1.06. Revenues rose 1% on a comparable basis. The 6% revenue decline at Energy was more than compensated by the other sectors. Total Sector's profit climbed by 16%, driven by significant profit increases at Infrastructure & Cities, Industry and Healthcare, as well as a sharp decline at Energy. This quarter, as in the first quarter, a substantial negative currency effect of 40 basis points dampened the profit margin, and we expect the same for fiscal 2014 as a whole. We were able to lift earnings per share by 11% to EUR 1.33. So in the first half of the fiscal year, earnings per share came in at EUR 3.03 or 16% more than in the previous year. Our free cash flow was solid at nearly EUR 1.4 billion, up slightly from the previous quarter, and this was largely due to a positive trend in advanced payments at Energy. Let me comment briefly on the individual sectors. The lower revenue in the Energy sector reflects both the difficult market environment, especially for gas turbines, and a much more selective approach to accepting orders in the Transmission Solutions business. Profit at power generation rose sharply, thanks to gains from the sale of TLT-Turbo for EUR 73 million and the successful completion of a turnkey project that yielded positive income of EUR 56 million. Our Wind business, on the other hand, was burdened by onetime charges of EUR 48 million for the repair of defective supplier parts. Since, among other things, the high-margin offshore business had a smaller share of the total business, it's contribution to profit was much lower. For the third quarter, we expect the margins of our Wind business to normalize. The earnings situation at Transmission was very unsatisfactory as a result of 2 HVDC projects in Canada. In fiscal 2011, we're awarded 2 overland transmission line projects in Alberta as general contractor. Massive charges of EUR 287 million ensued. The main reasons for that are the much higher-than-planned costs for supplier-provided construction services and contract penalties resulting from project delays. This development is very unsatisfactory. We have intensely scrutinized the causes of these problems and have rigorously drawn conclusions. A task force of internal and external experts is currently engaged in both of these projects. But we've also learned our lessons. With new business opportunities, we take risk-minimizing measures. For example, we obtain a second opinion from independent experts on technical risks or when we enter a new technology area. In addition to that, we will make changes in the early stages of our bidding process to lower risk in projects where our share of the value-add is small but our share of the risk is large. This is part of our comprehensive corporate memory concept, which stipulates risk-minimizing measures when certain early warning signals occur. We will make the risks of projects transparent earlier and more comprehensively before accepting orders. But there is also good news at Transmission. Just a few days ago, we were able to successfully deploy the second offshore platform in the North Sea, the 12,000-ton BorWin2 platform. It is scheduled to go into operation in 2015. The development of the Healthcare sector, on the other hand, was satisfactory in the second quarter in spite of the once-again significant negative currency effects on profit margin amounting to 130 basis points. Healthcare delivered an excellent contribution to earnings with an underlying profit margin of 15.5%. The expected sale of a particle therapy facility yielded an upward revaluation of EUR 66 million in existing balance sheet items. New orders and revenues rose on a comparable basis, and that upward trend was also driven by business in Europe. The development of orders and revenue was solid at Diagnostics as well. Both grew 3% on a comparable basis. In the Industry sector, short-cycle businesses at Industry Automation and at Motion Control in the Drive Technologies division stabilized further, with especially strong growth in new orders in Germany and China. In China, one major reason for this is that our sales partners are replenishing their stocks. Rising revenue in short-cycle businesses led directly to satisfying margin improvements at Industry Automation and Drive Technologies despite significant adverse currency effects of about 80 basis points. In addition, the productivity measures implemented under the Siemens 2014 program had a clearly positive effect on earnings, especially at Drive Technologies. Finally, let's take a look at the Infrastructure & Cities sector, which in the past quarter once again reached the projected gains and earnings in all of its businesses. The main drivers here were significant improvements in the execution of rail orders and the successful implementation of Siemens 2014 productivity measures throughout the sector. Before I turn to the outlook for 2014, I'd like to comment on the regions. New orders dropped significantly in the regions Europe, Middle East, Africa and CIS states because a number of major Wind and Rail orders were booked in the same quarter of the previous year. In contrast to that, the substantial surge in Wind orders, albeit in comparison to a weak previous year quarter, boosted order volume in the Americas. In the quarter that just ended, we've seen a very strong development in new orders and revenue in China, pushed by a positive trend in short-cycle businesses and significant growth in the Rail business. Since the stock replenishment effects mentioned before are not lasting, we still do not expect a strong and sustainable recovery of short-cycle businesses until late in fiscal 2014. On this basis, we confirm last November's outlook for the entire fiscal year 2014. And I'd now like to hand over to Joe Kaeser to explain our new strategic orientation. Thank you.
Josef Kaeser:

I think I'll speak to you standing up. I think that is good. That reflects our strategy; movement. The recurring changes, ladies and gentlemen, if you look at Q2, and I think it becomes clear that we are good at a lot of things, but we also need to take action in a number of different areas. That applies, in particular, to the charges from the Energy sector. And this also applies to how we deal with all of this. We need to take responsibility, and it's a question as to how these businesses and these -- in the sector can look forward. Building on the imperatives I outlined at the beginning, we have defined 3 fields of actions for the long-term direction of Siemens. Siemens Vision 2020 summarizes this. Some of the measures and directions described in them will impact financial results sooner, others later, but we will implement all of them with the same resolve
Mariel Von Drathen:

Thank you very much. We will now start our Q&A. The first block of Q&A is only for analysts. The first row with Ben Uglow, and then we'll go to James Stettler, the first row, please.
Ben Uglow - Morgan Stanley, Research Division:

So a couple questions. First of all, on Healthcare, You've announced the separation of the business. Can you say, Joe, what that actually means in practice, what is different in any way, shape or form than where we are today? Does the corporate headquarters move from Erlangen, and is there any difference in the way you go to market? What is the actual, what is the way this happens? Secondly, and it's an obvious question, you mentioned yourself molecular diagnostics and the need to grow Healthcare. Why not simply spin out your Healthcare division, get a different currency, i.e. help Siemens Healthcare shares, and use that to fund the growth? And at the moment, I would assume that any growth in Healthcare, any acquisitions that needs to be made still has to come from Siemens. And then the third question is, how do I put it? The elephant in the room, the one topic that we've not really been able to discuss at all, and I understand that, is Alstom. Is there anything you can tell us today about your interest in Alstom? I mean, should we assume that if Siemens were to be interested, that it's interested in the whole of Alstom, not just bits and pieces of Alstom?
Josef Kaeser:

Okay, shall I go straight or?
Mariel Von Drathen:

Yes.
Josef Kaeser:

All right. Thanks, Ben. I mean, what's different in Healthcare and what's going to be different, first of all, it's a great business, and I hope it's going to be different in a way that it get even greater. But what does it mean in practice? Healthcare is being set up as a company in the company because the go to market is somewhat different, the innovation path is somewhat different, and therefore, they need to be in their own control if and when they allocate resources. And we expect this move to make them a bit more productive and maybe a few basis points more on profitability going forward. So why not spin it out? Well, actually, it's not bad to have a great business. And if we look at the TPPA margins, if you look at the free cash flow, why would I now give that return on cash, which we have been spending abundantly for acquisitions in Diagnostics, to someone else, but they're the ones who were funding it in the beginning. On the other hand side, I mean, you said, why not using it as an acquisition currency? It's actually wasn't a question, that's a potential answer. The point is, if and when, long term, and I'll be very clear about it, long-term aspects, what forced the company into big acquisitions, life sciences or whatever, and the market will pay for its own multiples, all right? What that could mean is that if we are to do big acquisitions in Healthcare, then we will potentially think about how we can pay for an acquisition with the same multiple in the same sector. That's what I'm saying. So we are in control of that matter. It's great to have that business. We're going to build that business in Siemens. And if matters and paradigm shifts would move, it would not meet us unprepared, obviously [ph]. Alstom, I mean, obviously, look, there's been a lot which was talked about and written about and speculated about, so it's enough that we leave it there. We'd rather go by the facts, and the facts are that, so far, we got everything which we wanted to get. We were able to kind of delay a somewhat maybe one-sided aspect of selling assets. We got the opportunity to have a look into the assets for 4 weeks, and then we will be deciding whether or not we make an offer for something. And that's all what it is and nothing else. And you can be rest assured that we are pretty cool about the process, and we are not transferring the old Roman gladiators into the modern Paris. That's all, I guess, what we can say today. So we'll -- we appreciate the asset. It's got a lot of installed base. There are many good things, good people, but we'll be very clear about what we want, and we'll act when we know what we want.
Mariel Von Drathen:

Next question goes to James Stettler.
James Stettler - Barclays Capital, Research Division:

Projects. I mean, every single quarter, there seems to be again another problem that comes out. Could you maybe talk about how much you would like to reduce that business? How much does it need to be of the overall business? Why do you need to be in the project business? Can you maybe give us a target in the key divisions? And again, coming back, obviously, Alstom would even add to that much more, which has been, I think, a concern many would share. Question one. Question two, you talk about gaps in process. Could you maybe talk a bit more what exactly you're looking at there? And finally, the same thing in software, do you still think you need to make major acquisitions to build up that business?
Josef Kaeser:

Okay. I'd maybe give you a strategic answer on the -- whether or not to be in projects or actually, as a synonym, in solution businesses. And I'll hand it over to Ralf what exactly we do to minimize those matters going forward. Look, I mean, obviously, project business, it's complex. They are not always -- you don't always get what you want because you depend on a lot of subcontractors. But there's got to be a meaningful amount of project business to understand and get the systems know-how of your customer. If you don't understand how your customers act, if you don't understand what the systems know-how of your customer is, you cannot meaningfully develop the products associated with the solution. That's why there's got to be some sort of a solution business, but that doesn't mean that we take just the risks and not execute well on what we are supposed to be executing on, and that's the difference, I guess, what we are up to. Alstom, enough has been said. We believe you know what we're doing. We appreciate the assistance of the French government. It's been very mindful, very long-term oriented. You may remember, Werner von Siemens said once, "I'm not selling my future for the short-term profit," so maybe that's been one of the aspects which have been considered in taking the process along. I don't know, but if you want to know more, I'm sure that the people in France know about it. There's nothing to say. We look at it, we'll be diligent, we understand the opportunities and the risks, and then we make a decision on how we go forward. Gas, we still do share the view of others in the space that if it comes to gas turbines and power to gas, the United States is the place to be. And all our routes in the U.S. lead to gas. That's not only true for the gas turbines, that's also true with everything, which is along the process of frac-ing. And if I talk the process of frac-ing, I mean not only drilling the holes, I also mean on how to get this gas liquefied and transported to the customer base, where it's going to be burned to create power. And in that value space, 75% of the market is in the United States and Canada. So if you want to take that one serious, you better make it sure that it's known that you're serious, and that's been the aspect which we have been considering moving the responsible board membership to the United States. We are going to build our options on Oil & Gas. We've got a lot to offer. We've got that spread out in the whole company. We bundle it now, under the process industry, Oil & Gas, in manufacturing automation. We keep the account management in power because the compressor is usually the starting point of how you contact the customers. And this is the opportunity for us to create value and profitability and installed base. Now, Ralf, maybe you have more specifics on the solution business and how we handle the projects going forward?
Ralf P. Thomas:

So, James, the board and the management team is, of course, fully aware that this is a crucial question; what is the right dose, the right level of involvement in project business? But what we really believe is not the level -- determining the right level of project involvement is the key question. The key question is, how consequently we are assessing the risk structure of these projects before we ink the contracts? And in that regard, you are perfectly right, these 2 Canadian projects are another proof point that we have potential to grow into better processes in that regard, and we are very, very determined. We take that personal. We are very determined, making sure that we get the complete picture and the risk assessed before we start finally negotiating the contracts. So what does that mean? That means, for example, that any project management which is in the process of acquiring a new project, which is indicating that there is substantial risk in place, be it for entering new markets, be it for entering into new technologies, is no longer free in making the decision whether or not involving experience of the company, our knowledge base, corporate memory into the process of risk assessing, that it will be mandatory. And mandatory means it's not pulling resources into the assessment but pushing it, if need be, with support of the board and the senior management team. But this would still not be good enough. What we will do is we will also assess a minimum, a minimum value add from Siemens' perspective to make sure that we do not, do not take over-proportional risks by accepting contracts in which we are only minor partners when it comes to value adding but major partners when it comes to drawing risk and accepting that and having it finally on our balance sheet.
Mariel Von Drathen:

We'll continue on my left side with Andreas Willi in the first row, please.
Andreas P. Willi - JP Morgan Chase & Co, Research Division:

Andreas Willi from JPMorgan. My first question is on the project charges you took in the quarter. Did this proceed another kind of more deeper-dive review of the backlog or is -- was this just a normal quarter with a few things that have gone wrong? And therefore, also if you look at the full year, there's a little bit of room in your guidance, but there isn't that much for additional project charges. Where do you see the risk in terms of the guidance for the full year? And also where -- do you assume any potential gains and potential charges from some of the measures we have discussed today? And the second question, one business that hasn't really been mentioned much in the presentations or press releases is the Low Voltage business. Where do you see your strengths in the whole kind of Energy Management? Does that go all the way to what comes out of the wall? Or where does it stop for you in terms of the integration and the benefits there?
Ralf P. Thomas:

So thank you for that question, Andreas. Maybe I can take the first part of it with regard to these 2 projects in Canada. Let me first quickly describe what's happened before we jump to conclusions. These 2 HVDC projects are located in Alberta. We have been acquiring them in the year 2010 and '11, and everything looked like this would be well-known territory, well-known territory in terms of technology. So the project team, obviously, has been underestimating the challenges, which were local to a certain extent. So what happened is, initially, the change requests from the customer's side have not -- they have been frequent and have not been reflected in according -- in adjusting the prices accordingly. At the same time, the suppliers which had been submitting binding offers initially, those offers have been elapsing, and the project management, obviously, has been underestimating the price pressure, which is on the supplier side, increasing due to scarce -- to availability of scarce resources in that market. So now you may well say this was naïve. I cannot contradict, but up to now, we have been gaining ground in that regard. We have been straightening that out to a certain extent. If you ask me, as per today, can I completely exclude that there will be further charges from these 2 projects? I clearly have to say, and we want to be transparent in that regard, no, we cannot exclude that because there's still a residual risk sitting in the final determination of the design in 1 of these 2 projects. But in a nutshell speaking, we have been drawing conclusions, and we also have been learning it the hard way that Alberta, Canada, obviously, is not comparable in terms to the experience that we had, and that's exactly the point we would like to address. We will not leave it to single individuals anymore when it comes to accepting major risks, be it from low value-add projects on our side, be it for unknown market conditions or for extraordinary circumstances like we face them there, where supplier base has strong pricing power due to scarcity of resources -- qualified resources and also the underlying productivity assumptions for executing these projects. We're not solidly taking from local conditions but rather from others. So what does that mean with regard to our guidance? Of course, we see that there is an incremental risk from these projects, but we also are determined to counteract swiftly if needed, and with all the experience the company has, so we do believe that we are on the right track in remediating existing residual risk in these projects.
Josef Kaeser:

Thank you, Ralf. Before I go to the Low Voltage matter, James, I haven't answered your question on software. Not that I didn't know the answer, I just forgot about it, I'm sorry. So software does that need any major acquisition. No, it doesn't. Obviously, we need to figure out what exactly the cloud strategy will be, what -- how exactly we deal with the matter on mass data analytics. We're not going to build our own database, but are there enough partners out there who'd die for working with us in that space. So we'll be looking into a more partner-oriented strategy on the data analytics. In cloud, we believe we actually have a very, very unique technology on how we can protect the cloud in the industrial enterprise space. Because cloud in the space is -- in the orbit is one thing for consumer data or photographs or whatever, but cloud for very sensitive industrial data within the enterprise is a different matter, and we are pretty strong on this. Finally, we're going to build that further, and that's organic growth. And that's quite a unique way of doing it because this is -- again, you should know how your customer ticks. You should know the data your machines produce. If you know the data which your processes basically provide, it's a better place to get this one done than looking what you could do to do something meaningful in the industry. On Low Voltage, we've been pretty much done now with shedding and disposing of the so-called wired devices on this. There's still, I think, one left in a couple of countries, which had a local business, due to the pending [ph] and so on and so forth. On the industrial voltage, like MSCP MCCB, this is one of the examples that we haven't done well and now have increased profitability to close to up to 10%. And that's not a place to be doing this, so we do not intend, we do not intend to get that one out of the way. Low voltage -- the industrial low voltage, be it for industrial channels, as well as for the construction channels, is an important matter which creates a lot of synergies within the space, especially now with our new MCCBs, which are leading edge in the industry not only by function but also by cost. It will give us a new boost on profitable growth on industrial low voltage.
Mariel Von Drathen:

Next question, first row to Martin, please.
Martin Wilkie - Deutsche Bank AG, Research Division:

Martin Wilkie from Deutsche Bank. A couple of questions. Firstly, on your targets, you've given new margin targets for each of the new divisions, but we don't have a group level target. So I was wondering if you could just comment as to why that decision was made. Was it to allow changes in the portfolio mix, is there some other reason why there's not a group level target? And the second one, just going back to some of these divisions that we speculate as to whether they could get slimmer over time. You talk about the concept of the best ownership concept, and obviously, you've announced that Audiology will become a public company. Has that process of best ownership concept, is that complete in all the announcements being made or is that ongoing review?
Josef Kaeser:

Well, look, I mean, developing a company and get it to the better is an ongoing strategy, it's a constant strategy to, time and again, improve and then change matters that didn't go the way it was supposed to go. So obviously, when we did the strategic review, we looked at where are the areas of growth? What does the profit pool look like? Why Siemens? So why is it that we are the winning company in that space? It's about competencies, it's about go-to-market technology IPRs. Item #4 was, what is the synergistic [ph] value for the company? And item #5, do we see some paradigm shifts along the way going forward to get prepared proactively so that it doesn't happen to us rather than we make it happen to someone else? It has been the theme, and that theme should not be something which happens only once in a lifetime or when a company steps up to do a new strategy. It's got to happen every quarter, every year, every time we talk about how do we improve the spectrum. So, yes, it is an ongoing method because times changed, competitive environment's changed and markets do too. On no targets on a group level, well, if you look at the financial framework, I see a lot of group level targets, obviously, if it's ROCE growth, capital structure. But then I do want to -- my divisions to be accountable. I do want them to have a solid numerator if it comes to ROCE and thus has a very small denominator because prepayments and things happen along the way to finance working capital. And that's why we've been doing it the way we've done it. What's new is, this is important, we've got to know how we get there. And I want my divisions to make me understand what exactly is it that we achieved to get the job done. So the target margin is where we want to be. The operating system, innovation, competitiveness, people, it's about how to get there, and that's been the new logic, what are the targets and what are the enablers to get there, and that's why we put that new operating system in place, and that's the baseline and the management tool to allocate resources to get the business where it needs to be.
Mariel Von Drathen:

Second row, Michael Hagmann, please.
Michael Hagmann - HSBC, Research Division:

Michael Hagmann at HSBC. Two questions, if I may. The first one is on the general direction. You're talking a lot about cost out, EUR 1 billion cost out, because of the abolishing of the sector structure, 3% to 5% productivity gains going forward. What I'm really missing is the price realization. If you look at it historically, Siemens has been giving a lot of those cost benefits that you got out of the restructuring programs back to the customers. If you look at the profit bridges, we're only seeing about 2% to 3% price decline. Wouldn't it be much more sensible to focus very, very strongly on price realization, given the quality of the products that you certainly have within your value drivers? And the second one is on Oil & Gas and North America. I appreciate the answer that you've given before, but what I'm really struggling with is, where do you see your competitive advantage? If you look at Siemens, where are you successful, it's where you have a very demanding and big home market, and that, obviously, you don't have in Oil & Gas. So what are the 1 or 2 key competencies that Siemens has in order to compete successfully with companies that have been in that market for 100 years?
Josef Kaeser:

Thanks, Michael. With the cost out, the EUR 1 billion you talked about 3% -- 3% to 5% productivity. It's not rocket science, but we wanted to put a number out, so that people know what our targets are on an annual basis. Of course, we do look into price realization, but that's first and foremost about innovation. It's about getting the technology and the products ready on time, which is called time-to-market. This is about design to cost and this is about design to market. So the reason why we did not explicitly manage pricing power is because this is the result, and the root cause happened somewhere else. And if you follow the speech again, and I think it's already been distributed, we gave very clear directions on where we put the money and the resources to work and then we prioritize [indiscernible]. And this is then also about innovation, about resources. And this is then, finally, about pricing power because that doesn't come by our sales people talking louder and convincing more. This comes from the quality and the offering of our spectrum. On Oil & Gas, where is the competitive advantage? Well, very clear, as I said what I understand on the Oil & Gas, not direct drilling the hole, this is about from -- help from driving the pumps to inject water and chemicals, through instrumentation to measure the gas and the chemicals coming out to the transport midstream from the compressor where we now have to drive the aero derivatives and the turbines to power the compressor; to automation in the field of Oil & Gas and process [indiscernible]; all the way to e-houses of decentralized energy to help people in the field; to the LNG terminals, which we again do automate and provide electricity till all the way where people then burn the gas with our, hopefully, great gas turbines which we have to offer. So that's the value chain if I talk Oil & Gas, not about drilling holes, not about instrumentation only but the whole process where we can make a meaningful difference. And we also talk about Oil & Gas not only about process industries, mid and downstream. Gas is also something which powers the fuel turbines. If you look at the United States turbine market, it's not going to be much about coal. It's going to be about gas turbines in the mid and the long term. And that's why we want to make sure that our people are reliable at any level for our customers to then convince them that we are the right partners.
Mariel Von Drathen:

Okay. So we'll continue the Q&A session with Olivier Esnou in front of me, please.
Olivier Esnou - Exane BNP Paribas, Research Division:

Olivier Esnou, Exane BNP. I'd like to bring the topic back to M&A, not that I want to bring it back to Alstom but I'd like to just...
Josef Kaeser:

But you would like to, right?
Olivier Esnou - Exane BNP Paribas, Research Division:

It depends on you. So on the one framework, there's no longer the hurdle rates, which was there before. So I'm not connecting the dots, but I'd like to have your view on this and why you took it out? And maybe an update on 2 disposal, one you committed to, which is baggage handling. Where are we there? And one that was mentioned in the press but you didn't talk about, which is Siemens Healthcare [ph], I just like to know your commitment to that? And maybe just coming back to the targets divisionally. So there's 2 which look quite ambitious compared to where we are today. It's the overall Transmission and Distribution space and Mobility. So do you generally believe with the long-term trend you see to 2020, the rise of the emerging market competition, those are divisions that can genuinely get there organically, or is there an element of partnership, and I'm bringing back into the scope here again things you've mentioned before about the SMART project strategy, how you need to get better into emerging markets, things like that?
Josef Kaeser:

Thank you. It's a whole bunch of questions, so [indiscernible] for us. On M&A hurdle rates, I'll pass that on to Ralf later. The LAS is progressing. It's progressing. So if you know what you are doing, you will not be in a hurry because May 7 is May 7, but then we care about the business and the meaningful way of executing on the transaction. It's going to -- we're very close. So you see that matter progressing over time. Then the topic of course Siemens Healthcare [ph], they look -- I mean, this is a great business. The unit is very successful. They just announced a EUR 20 billion sales push program until I think also 2020, right? And it's great. And as long as they do not need major money and resources for any sort of M&A, it's a great business to have. On the other hand, is it strategic? Obviously not. So if you want to take it in a progressive way, you could almost consider it to be a cash equivalent. So we are very satisfied with what we have and this is, I guess, as much it takes now on that topic. More importantly, the topic of T&D, I mean, you're absolutely right, there's a lot of competitive dynamics out there in a couple [ph] of ways, especially on the commodities like distribution travels and the like. If it comes to automation, if it comes to integration, if it comes about to energy management, putting the dots together into a system, like urban systems, then there are only very few people who can help those matters get done in the area. And that's also true on Mobility, and I mentioned in the speech quickly, admittedly, that Mobility has managed more than trains. Mobility is about urban management, make sure that trains not only are built on time, but also arrive on time. Make sure that they're being optimized the ways they go. And it's about traffic management also in cars, connected cars, but that's what Mobility is also about. It's about this great sport of signaling. That is management in a way, Mobility management. So we like what we see. And the more we execute, not perfectly, but only as we've been promising when we took the order. This business has got good potential to grow the margin and, of course, the capital efficiency. On the hurdle rates, Ralf, maybe you want to elaborate a little bit?
Ralf P. Thomas:

Pleasure. Olivier, you shouldn't conclude from the fact that we didn't explicitly mention a number in the financial framework that we abandoned our hurdle rates for investment purposes, if you will, and for acquisitions. It's quite the opposite because it is obvious that it doesn't make sense to measure each and every potential target against the same hurdle rates because there's a huge difference also in market valuation and return expectations in the markets, whether you acquire or intend to acquire a target out of a software industry or more, rather, another target from an industrial footprint industry. So it's obvious, we do not abandon those hurdle rates. So these strategic imperatives we are following with our acquisitions are still the same. Those targets need to have the potential to grow in our hands, so it needs to make sense in terms of better ownership thinking, as Joe has been elaborating on. It also is necessarily that, that growth is not our only growth, but it is contributing to the bottom line and to our capital efficiency goals, which are still as ambitious as before, and are getting even more ambitious in the future as you noticed. And what we also need to make sure is that the synergetic value is something that is tangible enough to follow through. And what we give you instead of a figure in the financial framework is an offer that we will be more transparent in the future how positively these targets after acquisition develop in our hands. So we will give you follow-up on these acquisitions time after time.
Josef Kaeser:

And one thing to just add to that. It's been not about -- noted in the markets know what our specifics are. We've got to figure out by example. And in some areas, we really learned it the hard way. For us, it's not so much about hurdle rates, it's about how we integrate and execute the integration. Because even a cheap acquisition by multiples can get really expensive, it's not going to get integrated well. So we focus on what we deliver on integration and synergies rather than saying this is going to meet the hurdle rates in the beginning or not. And that's why we've put the focus more on what exactly is it that we promised, how are we under way in terms of synergy and providing incremental value. And that's what we are going to report the market to on material acquisitions.
Mariel Von Drathen:

Okay, so we'll have 2 more questions on my right with Simon on the second row, please. And then Alfred Glaser and then Antoine [ph] to my left.
Simon Toennessen - Crédit Suisse AG, Research Division:

Simon Toennessen from Credit Suisse. My first question is just on Siemens 2014. Could you just update us on that, what has been achieved? Obviously, initially, you targeted EUR 6 billion of savings. I think the latest update was closer to EUR 4.7 billion. The EUR 1 billion productivity savings, I presume, come on top. So just to get an idea of the overall cost savings in this time line? The second question, on Rolls-Royce, the margins of this business are closer to 2%, 3%. You flagged the GBP 50 million synergies. What kind of margins do you think this business is capable to achieve if it's a combined business with Siemens? And then lastly, just on the digital factory, you flagged in your press release that's about EUR 9 billion of sales. Can you just give us an indication how much of that is already software-related in terms of revenues?
Ralf P. Thomas:

Simon, let me start out with the Siemens 2014 targets. It is obvious that with the given project hits that we had to -- that we're suffering from, we will not be able to reach those targets when it comes to the marginal -- margin impact on that. But what we can assure you is that each and every cost measure that has been implemented is absolutely on track so far. So we still are striving for an overall savings, current fiscal, of more than EUR 600 million, being P&L-effective at the end of the day. And the incremental contribution to the EUR 600 million plus current fiscal in the second quarter was in the area of EUR 150 million. So we are executing on the promised productivity measures. However, the overall productivity, implicitly, is burdened by these project hits obviously.
Josef Kaeser:

Yes, on the Rolls-Royce, not sure about 2% to 3%. The numbers we've seen in due diligence looked actually much better. That probably has to do with that is not total Energy, but major parts of it. Secondly, why is that so attractive above and beyond what it adds to our spectrum? Well, the Service business in terms of margins is rich and sticky. That's a good place and installed base to have. The nuke business, indeed, has been indirect. When we looked at it, and we do believe and we do know that combining the manufacturing and engineering for our nuke business with our industrial turbines, that's going to get us way ahead of what ALDEN has been able to be doing, all right? So we feel pretty good about the accessibility of the synergies in a relatively quick time frame. We also feel good, by the way, to just talk about feel-good, what we have achieved with our metals business with a joint venture with Mitsubishi, which has been announced this night. It is a great thing because we now have Asian metals and the western world together. And Siemens supplies the automation as a preferred supplier. So this is the type of JVs and cooperation which provides that there's everyone involved, and that's hardly ever the case. But this time, it's good for Mitsubishi, it's good for Siemens and good for the stakeholders. So let me add this one because the current second quarter has not been that rich and make us feel good in a way. Thank you.
Mariel Von Drathen:

So I see 3 more questions on -- oh sorry, I had said Alfred Glaser on my right. I'm sorry.
Alfred Glaser - Oddo Securities, Research Division:

Alfred Glaser from Oddo Securities. First, I wanted to come back to what Mr. Thomas just said on the one-offs for this year. Do you still confirm the margin target of 9.5% to 10.5% on total sector margin? That's my first question. And second question is on the mid-term outlook and profitability. So you gave us the margin targets by division and the savings. For the Siemens 2014 targets, you actually provided us with a kind of EBIT bridge or profit bridge, including expected price pressure, cost inflation. Could you give us some comparable numbers or some rough idea as what we should expect for the next few years? And then as a third question on M&A, you said you would do more M&A going forward or specific M&A. What would be your preferred business areas or kind of businesses you would like to acquire in the next few years?
Ralf P. Thomas:

So maybe I can quickly help you out on the price pressure. There hasn't been any changes to our views in that regard. So what we have been telling you in the past is that for Energy and for Healthcare, we see pricing being very tight in the market. Price erosion may well be in the area between 3% and 4%. And for Industry and for Infrastructure & Cities, that figure would be rather below 2%.
Josef Kaeser:

The question on M&A, there's a long version and there's a short version. Long version takes probably an hour and the short version is, yes, there are a lot of areas. And obviously, I mean to discuss that now would be great but not maybe advisable. I'll give you one, at least, because you already asked the question. We are an active buyer in medical surgery. So if you know of anyone who's available, let us know.
Mariel Von Drathen:

I think, Mark, you had a question? Here on my right.
Unknown Analyst:

Joe, a question on growth. We've seen today as part of Vision 2020 the focus on some of these, I think you referred to them as growth fields. To grow more than your 5 major competitors, what gives you confidence you can do that? Do you need to spend more on R&D? Do you need to spend more CapEx, do you need to deploy more capital to do that? And last time I saw, and correct me if I'm wrong, I thought most of the incentives that are currently in place for senior management looked to be margin-focused. So I'm just trying to reconcile what gives you the confidence to grow faster than the competition, which, presumably, also is looking at these growth fields in a similar way? And the second question on shareholder return. Obviously, you have the 40% to 60% dividend ratio in your One Siemens framework. If you are growing, or manage to grow, faster than your competition and your ROIC is 15% to 20%, which I think is towards the upper end of that competitive set, should we expect more shareholder return compared to M&A in terms of how capital is deployed? Should that grow faster, if you like, than inorganic growth given that you would be organically generating more value anyway if those turn out to be true?
Josef Kaeser:

Thanks, Mark. I mean, obviously, those are the key questions we, of course, have been asking ourselves. Why Siemens? Why is Siemens the one to grow? Why is Siemens the one to access the attractive areas? And the answer is, we do have very, very bright spots in our portfolio. If you think about automation and now the process industry space. If you think about the turbine business, if you think about energy management, those are spaces that we have more elements to be successful than any other average competitor. The point is to bring their capacities and their capabilities to market. If this company, us as Siemens, start an incremental value to the single pieces of the specialists, it's got to come from the integration of the value chain in the market and then take it inside and allocate the resources where they belong to. So we believe we have a lot of opportunities in getting closer to the markets in an integrated way, rather than every one on his or her own. That's the first piece. That already addresses the current spectrum. It's just more sales efficiency and I think it's also been -- I think Michael has been mentioning that over there, pricing, so we can do much more and it doesn't cost any money at all except that we need to get ourselves out of the way if it comes to getting closer to the customer. So that's the easy part. The innovative part is more complicated because it takes time, and it takes resources, but it's mostly organic. M&A is not in the limelight as a means and a tool of growth because the value usually is being generated by organic rather than paying a lot of money for someone else's synergies. So that's what I would say on this one. Yes, we are capital efficient focused -- capital efficiency-focused. We have incentivized the division management on margins and continue to do so because it doesn't do any good to grow without any meaningful outcome on the margin. We're not going to put another target out there on a number that we need to be there, but what we put out as we said, this is important to grow our many aspects. But we do want to see the way to get there. Milestone for milestone for milestone, and that's different from former goals about growth. Shareholder return. So assuming that most of it's supposed to be organically grown, then you can also expect to get more return by the numbers.
Mariel Von Drathen:

We have time for a couple of more questions. I know we have 3 more questions in the third row. We'll start with Fredric Stahl, please.
Fredric Stahl - UBS Investment Bank, Research Division:

It's Fredric here from UBS. I had one question, please. In the new targets for -- well, in the targets for the new divisions, I noticed that power and gas, the target range there is 11% to 15%. And I believe that's a bit below where guidance has been for profitability in recent times. Could you explain why you're making this change now and -- well, and why?
Josef Kaeser:

Happy to. So the guidance has been, in the old view, has been about 16%. Then we've been adding the industrial turbines, which brought it down to, like-for-like, to 15%. We believe that in the short term, maybe next couple of years, there might be some challenging methods which are in the way of getting those 15% as an average. This does not mean that we'd give up on them, but there's more headwind than tailwind. And that's how we've been cautioning the market a little bit with that sign, that 15% is probably as good as it gets for the next couple of years. Not saying that the opportunities in that market could be actually materially higher than the 11% to 15% on average.
Mariel Von Drathen:

We'll continue, next to Fredric Stahl, with Will Mackie, please.
William Mackie - Berenberg, Research Division:

Will Mackie from Berenberg Bank. Two questions. 2011, '12 and '13, you stated that 1/6 of your revenues made no profit contribution. As we go through the initiatives you're making across the various businesses, what level of potential earnings contribution, as you reviewed the profit pools in those businesses, should we anticipate? And the second question tries to tie together some of your productivity initiatives and the questions around price realization. When we look at the EUR 1 billion or so savings and the 3% to 5% productivity, could you at least wrap that up into what level we should anticipate would drop through into the group profits?
Ralf P. Thomas:

So with regard to the productivity targets, I mean looking back into fiscal 2013, you will realize that our functional cost base was in the area of EUR 70 billion. And an average year in terms of our productivity targets of 3% to 5% would leave us with about EUR 3 billion of productivity. So the increment that you may expect on our way to fiscal '16 and beyond, with EUR 1 billion, is giving you additional productivity of more than 1%.
Josef Kaeser:

On the profit pool, for those, as you would call, bottom 10, if you assume a margin in the mid- to upper-single digit as compared to nothing, it's probably a safe place to start the model work.
Mariel Von Drathen:

Okay, we'll go for the last, but not least, question from James, please?
James Moore - Redburn Partners LLP, Research Division:

It's James Moore from Redburn. I've got 1 on the results and 2 on the strategy. You just alluded to some headwinds in power and gas. Gas turbine demand is worsening in the numbers and we see that elsewhere. Do you think we're close to getting to the bottom there or do you think there is further to fall in the next year or 2? Secondly, if you decided after the data room to acquire Alstom, you'd reach the 1x indebtedness target, would you be happy to do that? You said in the past you could think about doing that for strategic reasons. Could you repeat that statement or not? And then finally, maybe you could expand on why Michael Süß left the company and whether the strategic differences that have been discussed out there are important to understand?
Josef Kaeser:

Yes, on power and gas, that's got -- so if you look at the order intake, on average, we've seen pricing pressure to ease, still not where you just book the order and you put in the price. It's still a buyer's market but it's been easing. We've seen that ease there, and a few competitors also have come to terms, understanding that at some point in time someone needs to make some money over time. But what we are trying to get the market at is that in the next couple of years, maybe 18 months, maybe 30 months. I just don't know. The amount of new business which we will materialize as revenues will be relatively higher compared to the amount of service attached to the new business. So what that means is the revenue mix will go more into new business-related revenues and the incremental service is not yet there. The good news is -- the other news is that there could be some structural challenge on the mix between new business which is probably somewhat less profitable than the Services side. On Alstom, I mean, again, we feel comfortable in what the process is. Holding all the cards. There is no one else to blame for this or the other decision. Michael Süß, look, I mean, there's been a lot of speculation. We've seen that going all around outside and inside the company. So very easy for -- first of all, we miss Mike. He's been a great guy, great entrepreneur. He's been going and taking matters to the limit and, for the most part, this was a good thing for everyone. First. Secondly, when we decided that we need to put a meaningful important stake into our commitment to the American market on Oil & Gas, and also gas turbines and the like, then I asked Michael, I said "Michael, are you in for going to Florida or Houston or elsewhere, or would you rather stay?" And he said "Look, Joe, I'll have to think about it," and I came back and said, "It's a great place to be, but I would rather visit than stay." And that's as easy as that, and that's a decision everyone needs to make. We've been accepting it. We've been respecting it and we moved on and found someone else because we've got a company to run and not debate about whether or not we should do this or that or something else.
Mariel Von Drathen:

Ladies and gentlemen, this will now conclude the Q&A session for the analysts, and I now would like to hand over to my colleague, Mr. Heimbach.
Stephan Heimbach:

Thank you very much. We'll be starting straight again with the questions with the journalists. So those of you who need to leave us now, then you can do so now. We'll be taking a very, very brief break and I'll note down your names and then we can continue immediately.
Mariel Von Drathen:

And anyone who wants to leave the room because they want to spend some time in a separate room we prepared for them, you...
Josef Kaeser:

But if you're not, we're happy to have you stay. So don't take this as an advice.
Stephan Heimbach:

Okay. We're going to continue now with Mr. Kuerten[ph] and Mr. Camp[ph]. Mr. Kuerten?
Unknown Attendee:

Well, that's quite an honor. Mr. Kaeser, just let me ask if I've understood you correctly. Both medical technology or Healthcare and Transportation and BSH. As a matter of principle, they are no longer core business at Siemens and are they available? And with regard to Healthcare, your words were chosen in such a way that it really was the same type of words you used for Alstom, new challenges, et cetera. Maybe you can tell us when you plan the IPO? And where does Ms. Davis live?
Unknown Executive:

Do you want to visit her?
Josef Kaeser:

Right. Well, one thing after another. Ms. Davis lives in London. She works for Shell there. She's been there for some years and basically all of her career was spent in the U.S. at Texaco, Chevron, Exxon, et cetera, all of the big names. And the fact that these big names are headquartered in the U.S. or in Houston doesn't mean that they're not global players. And they also have global headquarters where the decisions are taken and followed throughout the world. You understood me completely incorrectly if you thought that med and transport are no longer core business of Siemens, that is not correct. BSH, well, it's not a core business, but it's good to have them. They're profitable and it's a company with good management, and we really like to have good returns on our work. So what you say is we are certainly not really going to change anything with hectic steps. Medical or Healthcare is a core business, no question, and it's going to remain a core business. Audiology is not a core business because, basically, over the course of technical changes that we expect, that there are no longer synergies, the go-to-market is totally different. If you've ever tried out a hearing aid, you know it's not found at the Siemens office. You have to go to a special shop. So the sales channels are different. Technologies will change. This is an excellent business, it was really cleaned up. It has wonderful returns, and it also needs to be in charge, and it needs to have its own asset allocation. So this is something which could be compared with Alstom. Healthcare, no question, it's got an excellent performance, fantastic management team, excellent market position. There are things that need to be done, of course, IT, ultrasound, et cetera. Improvements are required, of course. But margins -- to hold on to these margins that we have in imaging, I'm very happy with what Healthcare delivers today. But the world around us changes, and Healthcare competes with the most prominent and strongest companies worldwide and other companies are going to want to enter this field as well because it's so profitable. There are competitors that want to enter today's world. It's rather easy to, well, understand them, but think about up-and-coming competitors when Healthcare goes to the patients and not -- then we have to talk about Mobility. It's a question of Transmission technologies, intelligent devices to measure your glucose level or any other type of diagnosis. So things are changing, and you can see the factors determining competition are changing. I could go on at length about what is possible. It's all very attractive. But in Healthcare, if it's not a question of having a competitor in the U.S. or Japan or in the Netherlands with tomographs and others coming to us because, we, here in Germany, and we were then in the U.S. That's not what we're talking about. It's a question of the next billion people, how can we offer them Healthcare. It's a question of Mobility, it's a question of other things. And this is what we have to face so that we can continue to be as successful as we are today. But let me remind you of the example of communication technology. EWSD, we were the world leader, maybe a market share that you wouldn't even want to think of. Then there was a paradigm shift, which we missed. This was as a result of arrogance and not listening to what the market needed. This is not what we want to accept. So that is why we will give this asset the possibility to position itself anywhere with any technology so that they can act, that's it. And we look forward to continued excellent results within the company even though it will be independently managed. Mr. Camp [ph] and then Mr. Fleming [ph].
Unknown Analyst:

Thank you, Mr. Kaeser, I have a question on the changes at Energy. This is to be managed from the U.S. in the future if I understood you correctly. How does that fit with your plans for taking over the Energy division from Alstom. Isn't that a contradiction? And you mentioned that in your presentation when it comes to the job cuts, I'm sure you can't give us any figures, but you have a timetable on how far you've come along with your discussions with the employees and their representatives. Is this something that will be in the thousands?
Josef Kaeser:

Well, this board position responsible for the Americas region, and for the power generation divisions will be located in the United States. There are divisions like PG and Services in Orlando or Wind in Hamburg. They will remain where they are, and they are the ones who do the business. And if it is true that you're only able to do something where you are at home, well then you'd have to wonder about what sense it would make for the U.S. or U.S. company to want to acquire something in France. So it's just a question here of global businesses, and we have to be well positioned. You have to be where the market is, and the market for Energy technology and gas turbines and Oil & Gas, the market is in the Americas. And I'm very pleased that we were able to get someone who's not only familiar with the country from their vacations, but someone who grew up there and can help us out greatly there. We have excellent managers, Mr. Fischer in Energy Generation or Power Generation, and Mr. Tucker at Wind, they can do this on their own. And they can manage their businesses. The company does not consist just of the board of management, we have many more high performing employees who perform an excellent job every day. So it is a decisive because customers will see that we're serious about all of this, and that we're taking a major step in this direction. Employee representatives and reducing the red tape. If you call for that, there are different aspects involved. But these people who are active in the support functions and they will be affected by the converging of different functions, they may be affected directly or indirectly. They work just as hard and they're just as proud of Siemens as everyone else's, and that's why we will deal with this with a great deal of respect. And we will go about this calmly. We will look and see what the changes bring in terms of structures, what functions will go to the group, which functions will be dealt by the divisions and which functions may no longer be necessary. If you have 5 divisions, and this is something we don't have to do anymore. So we'll see how we can make use of these people in sales, in development and perhaps in manufacturing we hope to grow, which we haven't done for many years now. And that's why we will go about this quietly. And I've told the people who I've talked to a number of times, I've always told them, you never walk alone. We will not leave these people alone. And if some are necessary then, of course, we will implement this with resolved but levelheadedness and with respect. I can't give you any figures and we cannot say that they are the job cutting company. No. That is not management's role. We have to make sure we have perspectives. We need a vision. We need to see where we can grow, where we are successful and how we can implement our employees' motivation. That's what we want. That's why we referred to Siemens 2020, not Siemens 2016 or 2015 or third quarter, whatever. No. These are important aspects as well. People need to have prospects. They need to know where we're headed, and they have to understand this, and that is our target. Vision 2020 gives our people a prospect and also make the path available to them, and people who are involved and see that they have some share in their success. So it's not just a restructuring program or a strategy, it is something that reflects the company as a whole. The company, it's culture, it's values, but this can only be done, you can only give people more money if it's been earned beforehand. That's why this management and the success, what we need to have is prioritization. That's what's important. And we also see that this is good for the people in the company. That is our plan, a holistic approach from strategy consolidation, streamlining, increase in competences and involvement of our employees. It's very important to me that the goals of 2020 -- Siemens 2020, is an overall picture, not just percentages that may not be achieved. Mr. Fleming and then next speaker.
Unknown Analyst:

I have a follow-up question. What will be the legal form of Healthcare, and what about the acquisition and the history of Siemens? What can allow us to achieve our profitability targets? You told us that there would not be a group-wide profit margin target. I don't understand that, perhaps you put figure on that. And maybe you could give us some information as to what new divisions, what margin ranges has already been achieved based on Q2 or the first half of Q2 or fiscal 2013. My second question is on acquisitions. The hurdle rates have been individualized, that's what you said, and this seems a bit arbitrary, especially if you consider the margin rates before PPA. Maybe if you could give us an example using Rolls-Royce, what financial impact will this acquisition have? You have announced such transactions. You said that you would give us that information when you announced the acquisition. And then to go back to history, how do you see yourself today? Is this an evolution? Is it a major change? Is it further development? Is it a revolution? How do you see the situation?
Josef Kaeser:

Well, that was a whole bunch of questions. The form of Healthcare is not relevant, because it doesn't exist at this point in time. It won't be a carve out. It is an independent management of this business, and this will be that most of the corporate functions will be there, and the company itself will have its own global go-to-market and it will not be involved in the group-wide association there. And it can make use of the group's services if it considers this necessary or if it optimizes some elsewhere and as far as governance is concerned, the corporate situation remains. So, of course, we will at least have some of the considerations either [ph] tax aspects and there are also the questions for approval when it comes to certain devices and applications for this type of legal structure. And this is not what we are focusing on right now today. The margin target, we want to show the company as a whole, and it's on EPS and not on sub areas and on the basis of P&L. Of course, we could have an overall margin target on the basis of total divisions, but we didn't want this because businesses, by their nature and their character, have different cycles over the course of time. So today, some businesses might be within the range, but the short cycle businesses might be weak and that's something that has happened. And what we do is we manage at the level of the divisions and then we allocate the resources on that basis. But the group, as a whole, has to be in good shape, and that's why we refer to Rosie and a payout of some funds to the shareholders. Acquisition hurdle rates, as I said before, we have done away with them. How are we going to do that and our targets of course, and this is something that we will give you for Rolls-Royce and what the situation is. What about the 7th of May? How do we see the 7th of May? Well, I assume that I will read all about it tomorrow and that's how it is in life. It's not really all that important what I think, it's how the message comes across and how -- if we are able to convince you, it's the employees, the customers and you, the public, because all of these aspects play a role in our company. And that's what we call the stakeholders. The 7th of May, well, let me put it this way, the 7th of May, 2014, how would I assess that when it comes to this? I will work very hard when it comes to Vision 2020. I'm going to work with my management team in order to understand our common duties, and we will take it from there. Well, I would have to assess this within Siemens or it can be done outside of Siemens. If you want to know where I live, then you have to ask me. I think we can continue with Ms. Maya [ph]. No, before I talk about the hurdle rates at Rolls-Royce, I'd like to make one thing clear. The profits after PPA without including the write offs and intangibles from acquisitions, that's no change. It's just formalizing something that we've done all along and it goes in line with the market. Other major companies do the same thing because in this area, PPA effects play a very important role, and this was considered as additional information. You can look at our previous earnings releases, and this is now included in the target and in the profit numbers. This is meant as a simplification. We're not trying to cover anything up. Now the hurdle rates, I'm sure you recall that the existing hurdle rates have an effect on the EVA depending on when they were integrated, depending on when the company has a contribution margin beyond, and this is 5 years after integration, and that is precisely what the target is for the Rolls-Royce acquisition. We expect to have a cash flow return from this acquisition in the fifth year following acquisition, and that would be about 12%. I looked a couple of things up, and I wanted to see which divisions have achieved the margin ranges and which ones have not yet achieved these goals on the basis of preliminary figures. And things might change on the basis of consolidation due to internal supplies, et cetera. And this was always done at the Sector level, and this is now at a different level. But this is a rough statement. We have PG, WP, M, Digital Factory, Healthcare, SFS and Building Technologies, have achieved their target ranges, and with Mobility, it's just barely -- where they didn't reach their targets is Energy Management and process automation and drives. I think those are the most important ones that we can refer to at this point. We'll continue now with Ms. Maya [ph].
Unknown Analyst:

I'd also like to ask 3 questions. One goes back to the savings target. You said you only have to decide exactly who will remain within the company or will have which function to fulfill. Now, we still have to talk about sectors and divisions and just emerging division doesn't save a single euro. But you already have the EUR 1 billion target set. I'd like to ask you how exactly did you arrive at that figure? Second question, corporation with a board member in the U.S., in concrete terms how is that supposed to work and how often does CEO come over, or do you have tel calls? And following up from that, we've already have 2 women in the Siemens' Board, both of them are German speakers and headquartered in Munich, and it still didn't work. So what makes you so optimistic that this time that's going to be a, well, slightly longer appearance? My third question in the new structure, lots of things are being dialed back. Many of them are things that as the CFO, you agreed with at the time or decided. There were lots of reasons, so -- for doing that at the time, it wasn't necessarily the big flow [ph], but you said this a structure that will help you affect he future, it's now -- it's the opposite now. At least you're now presenting it to us as having worked entirely the opposite way. Why is the structure you're coming up with now the right one?
Josef Kaeser:

Well, this appearance, guest appearance if you like, it's definitely not going to be something I'm going to tackle. But as far as the targets of savings are concerned, I think I have described the process to you all how we are approaching this. It is obvious that by losing 1 level in our sectors there are certain functions that we simply won't have anymore at this level. They simply won't exist. So you've got to draw up your balance sheet and the P&L accounting, obviously, cutting items need to be done properly, but also things like business development in certain sectors, which won't necessarily be done anymore because it will be done by divisions and by the group. So very clearly, there are some savings opportunities that arise through losing certain levels and/or functions. I think that is obvious. If you merge 2 divisions or make 2 out of -- 3 out of 2 as we did in some of the synergy management we did then obviously, you start by losing some of the top level of that divisions, then end up having to need 3 strategy papers, just one and so on. So there are quite tremendous synergies here. I think that's not in question. But point I was trying to drive home was actually that we have to be extremely careful, cautious and respectful in assessing that situation. I think this is borne out by the fact that looking at the time by which that savings is to be achieved and when it will have a full impact in our accounts, that is something for which we've taken a lot of time. I mean we could do this all quietly. We don't do this, we have said it, EUR 1 billion. That's the figure. We arrived at that figure because, obviously, we haven't taken it off the cuff without any idea. But we do understand how many people are working, what their jobs are, which divisions, which regions they're working at, which actual locations, we know that. We know it very clearly. And basically, we know that every single day because the point is really who has a job and who gets which remuneration. We know that. And on the basis of all this, we will continue our process, and then people most involved, that's the representatives of our employees and workers, we'll discuss with them how exactly to do this. As far as cooperation with the U.S. is concerned, first of all, this isn't new. We're talking about having the headquarters of our division moved there, but not to stay there. My official headquarter is in Munich and yet I spend the least time in Munich. So it's not just regional determination. You go to where the business is, where the people are. You can stay in one place too, but if you do, you won't move much. So that is a point of departure from which to control the world, the resources and the point you return to, but it's no more than that or no less than that. I'm not entirely sure, whether I agree that the previous 2 women members of our board, Ms. Adora [ph], Ms. Cookson [ph], it hasn't worked out with them. Well, Ms. Adora [ph] spent many years at Siemens. She did a good job at HR. She did even better when looking after the regions in Europe now. I mean there are hardly any people who have been so sales and customer-oriented as she is. And I know that for a fact she is certainly -- In terms of HR, some people may disagree with it, but I do not know her performance in customer and sales. And Ms. Cookson really sorted things out properly from -- as far as organizations and methods and competence and so on are concerned, she did that very well. I mean the other things, I think you know, as well as I do. Now you're saying we've dialed things back. Some people spoke of -- we went back to the future. I think I've mentioned several times how we would like to develop the organization in the future, always -- not assuming that we're too big that we have to sort of higher things off. But we have to say that there are these 4 sectors that -- where we need to sense things. In other words, keep our hierarchies on a flatter basis than before. Having 4 sectors is a clear regulatory framework aspect here, which comes into play. We've taken -- we've declared [ph] that possibly things may develop in such a way that these sectors may develop their own sort of life in the company and if so, that needs to be corrected and reined in. The philosophy is we are all Siemens, and it's important what is relevant from the market to within the company, and that's what counts. We're look -- because that is so, because the incremental value of the company and the brand is to be seen in the added value created from moving in market as it were to within the company. That's why we've done what we have done. So if it turns out that it was wrong, or that it's too complicated to implement because it really means you need to master the management of the matrix, integrating people and interest that's involved here. But if it turns out that it doesn't work, we can always go to holding roots. But if you -- once you've set up a holding and you want to go back to this integrated market approach, then you've missed that opportunity. That's why what we are doing is perhaps the most promising way of getting company to move forward with market integration, really focusing on the market and using the market, going through value-added, electrification, automation, and the overarching opportunities of digitization. But this is the way we want to generate added value. At the end of the day, that's what you call synergies. And the group -- well, Wellberg group, which is not a specialist company needs to create synergies outside job rather than overcoming complexity. Obviously, this is a constant tightrope walk and we see that frequently not just at Siemens. Mr. Houck [ph] now? Then 2 more people on my list after that.
Unknown Analyst:

I'd like to ask 3 supplementary questions. One concerns the change of Energy, because I don't think it's entirely clear whether Ms. Davis, is she going to have hundreds of people who have to move to Air London, or she's going to sit in place with a dozen of people working under her directly. How do we have to understand that? Second question concerns Healthcare. Can you exclude an IPO in the next couple of years, or will you say no, no, we keep that within the company. We don't want to make that an independent company, quote it on its own. And the third question, Mr. Russwurm, Mr. Heimbach have changed jobs, why? What are you thinking? And you really enjoy digitation and digital factory and all that sort of things. You seem to be very enthusiastic, but why is it that you had them change their jobs?
Josef Kaeser:

Now, the change -- the move, Ms. Davis' move. Well, as you know, Ms. Davis, about 10 minutes after the first message came online, she actually gave notice to her employer, it was supposed to happen earlier. But it's wasn't due to her. It happened that the information leaked out sooner than we had expected. So Ms. Davis had -- sort of needs to work out at exactly how she uses her energy, how she takes care of the U.S. business and to say it, well -- I can take you with her, then you can ask her how is she, I would imagine where she lives and what she likes eating and what she does and then neither you nor I need to speculate about this. You can ask her. No look, honestly, Ms. Davis was nominated to serve as member of the board only yesterday, and I think we need to give her the respect she's due. She has to put her mark on that business first, and then we'll see. Another question off mic, answer, no. There was a very important consideration behind our decisions, which concerns our presence in the market. We didn't want to have our own headquarters set up somewhere. The infrastructure of Energy services with more than 1,000 people working in Orlando, that is what we wanted to use, and as part of that infrastructure, the activities will be centered, just how she is going to run the her sector, her activities. How she is going to make the Americas more successful, while, I think, here we need to give her the opportunity to describe that herself. Obviously, we need to align ideas, it's clear. But I think it is the respect that Ms. Davis is due to give her the right to propose just how she wishes to develop the company, and how she wants to become member of the management. That's all I have to say. Healthcare was not a question. Yes, yes, while that question can be answered any which way, we've got a headline. I think I've described the process to you what we are intending to do in order to strengthen Healthcare, and I think I would like to leave it at that. We want to be the people who decide what to do and at which time, what we think is right for Siemens and for Healthcare, and that's what we've done. As far as a changing of jobs between Mr. Russwurm and Mr. Heimbach is concerned, there's no special logic behind that. I think it's sometimes a good idea. If you've got lots of people in the company, also in the management team, who've done various things already. I think it's a good idea from Mr. Russwurm to start looking into new areas. HR is something he knows already, he's done that. Mr. Heimbach is well versed in Energy matters. He wasn't that much involved in the regions before Europe, Africa, to name a few. So it's a good idea sometimes to change and to give people an opportunity to have a more broad-based experience, and that's really what it's about. I discussed the matter with those gentlemen and asked them whether they would enjoy getting this new experience, technology and the management of the matrix and regional responsibility for Europe, respectively. Both of them thought this would be an interesting idea and were happy to go along. See how it goes. Chris Bryant [ph] is the next speaker, then Mr. Keystone [ph].
Unknown Analyst:

I hope I can ask my question in English? So 3 or 4 questions, please. The first one, again, on Alstom, I'm sorry. But there seems to be an impression now in the market that maybe Siemens isn't entirely serious about the Alstom bid. As you, yourself, Mr. Kaeser, have mentioned this morning, you get to look in the books for 4 weeks, GE, perhaps, has to pay a bit more money now, and that all sounds quite good. So maybe after 4 weeks, Siemens will just walk away, and there also seems to be comments out there about, perhaps, Siemens is under pressure from the French government and from Berlin to do something. So maybe if you could try and correct me if I'm wrong on those things. Similar line, would GE acquiring Alstom really be all that bad. Several of our analyst colleagues here wrote so when the deal first happened that actually fewer competitors in power generation might actually be quite for good for Siemens' margins, and you might not actually mind having General Electric in your backyard after all. And so the question is do you really see it as sort of real competitive threat? Is it sort of an existential issue that you need to respond to, or is it really not that bad after all? And similarly, if GE was victorious, then could you do something with the train business then after that as you seem to have indicated with the run off? On a similar note, ICE trains, perhaps Siemens' most famous products for most ordinary people in the street, and I gather you're going to talk to Siemens workers later today. So as you've said already this morning and somebody referred to, is trains core or non-core? What are you going to tell Siemens' workers who presume reading the press reports and people who work for the train business might well think, now, well perhaps I'm not core after all? Last question, please, Russia. Mr. Kaeser, you appeared all over the newspapers regarding your comments to Mr -- after your meeting with Mr. Putin. The question is have you since reflected on that and given the escalation of the situation in Ukraine now, is it now different for German business? Do you have to reconsider or is it still a matter of short-term turbulences?
Josef Kaeser:

Yes, well, that's been a whole bunch of questions. Look, on Alstom, are you entirely serious. If I wasn't serious, I would not waste my time and the time of my team to take the effort and look at it, okay. Secondly, it would be disrespectful to anyone in France and outside France if we would just play this one on a different ground. So you can be entirely sure whatever we do on that topic, we give it the serious thought everything to play or to stay away. But what I'm saying is we are not giving control away. We want to be the ones who decide and not being pushed by someone else. Then your third -- the second question was is it actually maybe good for Siemens after all if GE acquires the asset? Well, we'll see when it happens, and then we'll take it from there as positives and negatives. I mean, there is a 3,500 turbine installed base, 600 round about on gas, about 2,600 on steam and installed base is a meaningful business in Service. So it has got -- there's some value there. And the regional footprint on China and Indonesia, India, there are a lot of good things in that company. And that's why -- why we did what we did. On the other hand, I mean, if someone pays for consolidation, and now everyone else that doesn't need to. That's clear. On the train business, I mean, I never said it's core or non-core. All I said is if there was a meaningful option to build stronger companies together, and this could be hypothetically, it could be a way to bundle Energy and Power and bundle the transportation business as we go along. That's been all. On this one, about to tell the workers, we'll tell the workers that look, whatever that business is going to be, all we do is to make it more successful, make it more sustainable, and this rescued [ph] to lose the job. On Russia, the upcoming -- there has been a lot written about, talked about. At a time, when I had to decide whether or not to go in a complicated environment, I mean, I was aware that this would cause a ripple in places. And then at the time when we decided to go and talk to the Russian President about many things, not just about how great the Olympics were, then I thought it was important that we talk to each other and not about each other. Now today, obviously, the situation has been escalated, and I'm very concerned about the development and the inability of the global society not to get this one done in a meaningful way. I mean, if I had talked about the so-called short-term turbulences, that was clearly meant integrated context of that Siemens in Russia has survived 2 world wars, and obviously compared to 2 world wars, there is a relevant difference to that. Would I say it again? Well, definitely not because time and again, I got to prove, which I should have known before, if you take things out of context, they may look a bit different as to how they have been meant when they report into a context of 2 world wars. They mentioned this one. And it's still my belief and that hasn't changed that people need to do what they think is right at a time, even though it's complicated. And secondly, I also do believe and continue to believe that people need to talk to each other because dialogue is the matter of choice to get things done. If I always would put sanctions on my people or my people put sanctions on me, if we make mistakes, there will not be anyone in the company anymore without the sanction. So we've got to talk to each other and try to find solution. That does not mean that one can tolerate unlawful behavior. But then again, at the end, the world is about solutions, and not about cold silence.
Unknown Executive:

Mr. Geason [ph] and then here over on this side. Mr. Geason?
Unknown Analyst:

Mr. Kaeser, I have 2 questions. First of all, on Alstom, how can we imagine it? The French Minister of commerce calls you on the weekend and says, why don't you make a counterbid, and how quickly did you decide to drop such a letter? So what was the timeline there? And the whole idea of this swap, you get our Trains and we take the Energy division. Is this a French idea or was it the French government? Was this French government picking up on an old Siemens idea? And then on Healthcare, our colleagues just asked a rather provocative question for 2 to 3 years time, will Healthcare then still be in the group or will there be an IPO? I think, you sort of bypassed that question. What's the situation going to be there in 3 years time?
Josef Kaeser:

Okay. Let's start with Healthcare. And of course, you can, you asked if it will be ruled out, if we can have an IPO in 2 or 3 years time. Then all of a sudden, we'd have headlines. Well, we want to strengthen the excellent business, and if there are paradigm shifts and we have EUR 10 billion to EUR 15 billion in acquisitions, if we enter into life science or biotechnology in order to hold on to the asset, well then you might imagine that these high multiples, which are much higher than the average of the assessment of electrification, well then, of course, perhaps, we might involve the capital market, as is the case with similar multiples in the business. So we can hold on to the majority. This is one way of ensuring that we remain successful there. And if the market requires major acquisitions, we don't want to take the resources away from Energy, Energy Management, Building Technologies, et cetera. So this is a very proactive step that we are taking. We always want to be able to do what is required on the market, what is triggered by the market, that's all there is to it. It is an excellent business and it has excellent prospects for growth. That's how we see it. Now how could we imagine all of this. Well, of course, things don't always happen as you expect. That is not part of Vision 2020, back that -- on that strategy to submit a bid, and that's not our intention today either. But managers and the team of managers is obliged to react to changes and to act in accordance with changes on the market. We have to show that we are able to act, and we have to be able to act in all areas at all times. So you could imagine, perhaps, that on a Friday, you go to Washington, you're at an event there and you hear something is going to happen on Sunday and the decision might be taken on Sunday, then you stop and think about what it might mean for Siemens. You don't know, but you know what it could mean and that's why you have to think very carefully about this because if the asset is gone, you don't have to -- you can't stop to think about it again and because you're talking about Vision 2020, that's why we decided on the Board to get together and discuss it. All of us discussed it. And one was in the U.S. and we called and he was also involved. So we decided that we will make sure we have the possibility to be active here and to decide whether or not, we want to participate and it was necessary to send off our interest. And this meant that the Board had decided to give us more time, so that we could get our thoughts together. And then, of course, you have to think about what could be attractive about it. If a whole company and a country wants to get something positive out of it because there was a solution available. So we thought about what the solution could be that would be good for everyone, a win-win situation. So we try to reflect on this potential creation of 2 strong partners in different areas. That's what we stated, and it was -- we had the request that we wanted to have at least a fraction of the time the others had, so that we can assess the asset and to know what is really involved. And that's what we've been doing, and we are going about it calmly, and we will decide whether or not to submit a bid. And then they will decide, whether they take our bid or the competitor's bid, that's what could happen. And this proves, and this is important to me, that the public, our customers and our employees see that our company can act at any point in time. If people think, we're just concerned with ourselves, with our strategy, the strategy we've announced here today, then they're wrong. Because our company is much more able to perform, when it needs to, and that's important. We need to show that we are there, when people need us. We will continue here over on the left and, sorry, I don't know your name.
Unknown Analyst:

Mr. Kaeser, the unrest amongst the employees, when it comes to the potential shedding of labor, I respect, the respect you have for your employees. But there is some expectation, I think, they might want to hear a number, how many jobs will be lost. And my second question is how do you want to attract engineers? There's a shortage of engineers, but what about big companies like Siemens if they cut jobs? How do you want to attract them? With the trains division, are you concluding that this swap with Alstom is no longer on the agenda? Does that mean that you want to hold on to the trains division?
Josef Kaeser:

Well, let's begin with the unrest. This was considerable in the summer of 2013, and all of us managed to calm things down, as of August, and that lasted until January, February, 2014. And then when we announced our new strategy, this meant that, of course, internal communication and also the communication to the external work led to some unrest, of course. Now today with our corporate concept, I'm calling it a concept and not a strategy, with this concept, we want to make it clear to the employees as well. We want to show them where we headed, what we have in mind and what the prospects are, what our targets are. We put figures of them, showing them what we want to achieve over the longer term. And I think, and I'm sure, you'll see this about 120,000 colleagues that we can speak to directly, and we will do this -- I will speak to the others, when I visit them in different parts of the world. I will explain to them, what we want to achieve and what contribution these people can make. I'm quite sure that this direction, we are taking and the prospects that we're giving them, then people will know, this is what the structure is, this is what is happening and we can all get back to work. And I'm interested in the feedback that we will get, and this is exactly what it indicated. Things happen again and again. Things have to be done because there are competitors that don't always stick to this, but this is something you have to deal with resolve. Attracting engineers, we get a lot of very good engineers because Siemens is a very well-respected brand. The innovation and quality, there is not a lack there, and I am confident that this will remain to be the case in the future as well. Now based on what I said, when you want to -- if you want to draw any conclusions about the Rail division. Well, I think that would be a bit too much to interpret something like that into it. Our Rail division has done very well, and there've been a lot of comments on the infrastructure sector. They've worked very well, they were tired and they are within the target margin range within the year. And if we continue in this way, then we will have a high capital efficiency. Rails for urban management, this is a very attractive asset. And this is a tight market for long distance rails, but I think if we focus on this, we can make a profit. You have to see how the market and the world develop. It's a perfectly normal process. And to conclude from what I have said, that maybe or we don't want to consider the rails. Well, I think that would be taking it a bit too far. Ladies and gentlemen, I have 8 more requests for the floor. Mr. Vort [ph], Ms. Fieser [ph], Mr. Ripeger[ph], Ms. Gaezar [ph], Mr.Cato [ph], Ms. [indiscernible], Mr. Webb [ph] and Mr. Eddie [ph]. We have 20 minutes left, so I see further requests from the floor, but I can't promise you I can give you the floor. Mr. LaCoeur [ph]?
Unknown Analyst:

I come from Les Echos, a French paper. You won't be surprised if I ask you another question on Alstom. A lot of questions have been asked already, but this discussion that you had on that weekend with the Board of Management. At the end, was this a unanimous opinion or were there any abstentions or was anybody opposed? Do you have minutes from the Board of Management that we could read up on? Now after the spectacular exchange of correspondence with Mr. Cromme, would you say that things have returned to normal again? And now, I'm talking here about due diligence. Have you really entered into this phase? Are you happy, with how things are going? And with the discussions you've had with management at all different levels? And that's going to happen in the next few days, will you be involved in these discussions, you, personally? On the 21st of May, there is a date in Paris, a roadshow for the 2020 vision. Will you be there? Will you go to Alstom or to the Elysee or do you have other dates or appointments on that day in Paris? And another question, not on Alstom now. In 1 year, you'll be giving us a progress report with regard to portfolio measures. So do we expect in the coming year that there will be intense investments or divestments? And this is the something that we need to consider as Siemens correspondence as M&As or divestments.
Josef Kaeser:

Well, if you like, this is a unanimous vote on the Board of Management because it was a vote for active participation in this process. It was never abnormal between Mr. Cromme and myself. I visited in February, and I discussed a number of things with him, everything is perfectly normal. Since then, we hadn't met. This is something, of course, that was made more dramatic in public, but basically, it's a company that decided to divest part of its assets. Someone had submitted a bid and there's someone, who is considering whether to submit a bid, no more, no less, and this is it. I will be going to Paris on the 21st of May, and that's our roadshow, and I'm sure we will get some feedback, as to how things are seen and whether there are questions. And I think, that's basically all that I have in my BlackBerry or in my diary. Portfolio measures. Well this corporate concept that I presented to you today is based on giving us a direction, a prospect with growth, productivity, resolve, and will also take into account the employees' interest. Portfolio Management is not the main thing that we are involved with. You create values by bringing the country forward with productivity, innovation and growth, that's what we will be focusing on. And I assume that our company will quiet down, and everyone will know what they need to do. And that is what we are going to do now. Roll up our sleeves, and start working hard. And then we can tick things off at the end, that is our plan and that is how I am going to present it to our Siemens colleagues, this afternoon. We will continue then with Mr. Fisch -- Ms. Fischer [ph] and then Mr.Requardt [ph].
Unknown Analyst:

Mr. Kaeser, you mentioned 7 points in your vision. One of them was that you want to improve the Net Promoter Score by at least 20%. Where are you today? I don't know if you know offhand, but where is GE? Where are the competitors? And a similar question is that you said that the value of the approval rate of the employees, satisfaction rate, you didn't tell us what value you are at the present time. And then I have a question; aero-derivative gas turbines. Are you going to enter into the aircraft business or is this technology that comes from the Aircraft Industry and is used in other areas. And while we're talking about aircraft, have you heard anything more about the airports? Are you working on it or are you still waiting for plans? And my final question, maybe you said it, by the way, but I missed it. Are there other people, who you meet at Alstom, and who also take a look at their books or is it just the 2 of you, the 2 applicants because if there's only you and other company, it's quite good opportunity to have the opportunity to have a look at their books.
Josef Kaeser:

Okay. What I can see here is a lot of consultants, who are working for us, but apart from that, I don't know if anyone else, and I did -- they don't wear badges, of course, showing what company they come from. So you have to know yourself if you're involved or not. So I can't answer that question. The Net Promoter Score, this is customer satisfaction in the broadest sense of the term, and this is just under 30% right now, and we want to increase it by at least 20%. That would be an excellent value in B2B business. And it basically tells us, what percentage of the customers would recommend us actively to their best friends. So this is a very strong value. In consumer brands, it's often higher, but that's a different environment. And the satisfaction of our employees at more than 75%, that's an increase, but we want to hold on to that high figure. It's not always that easy even if you have to implement certain measures. Aero-Derivatives, the name says it is a derivative from an aircraft turbine. This is on the basis of an aircraft turbine, that's how it operates. And these aero-derivatives are used to drive certain things such as compressors. And these compressors can be driven within electro motor, with a large electro motor or -- if you have power, but oftentimes, you don't have power, pipelines in the middle of who knows where, then you need to use gas or diesel or fossil drives, and then we have turbines, smaller turbines by Siemens, which could be used for this purpose. But conventional turbines are very sensitive, and oftentimes it takes days or weeks to adjust them to the environment. An aero-derivatives is a type of plug-and-play. So you take the turbine, you plug it into the compressor and it works immediately. So that is the logic behind aircraft turbines. If you need 3 weeks for an aircraft, then you've got a problem. And that's the advantage of these aero-derivatives, you plug it in when you need it, and it works. And they're light weight, that means you can transport them by helicopter very easily and this offers us a number of advantages. That was a gap that we have now closed. And this is all seen in the area of 3 to 65 megawatts. And since, we're talking about aircrafts and the airport, well, what should I say? We haven't begun with the time calculations because all the documents we need have not been received. Some of the information is available and we will collaborate successfully and very closely, but there is a major task that still needs to be done. NPS and the employee survey. Well, I think, I already mentioned that. Okay. Let's move on then to Mr. Vipeker [ph] and then Ms. Gaezar [ph].
Unknown Analyst:

I have 3 questions. I heard that you focused primarily on environment in the past, now it's just the translation. I'd like to know what is the share that the sort of data processing job house for you now and what would the future share of the business be? Next question, this restructuring of Siemens group. How does it fit into your idea of calming down the choppy waters after all the major strangers in the recent years? If I understand it correctly, some of this offers the time to optimize processes because otherwise you think you are pretty well geared up for the challenges. Was change of strategy really necessary? Second question, briefly regarding M&A. According to current plan, sort of giving up more business from the sales revenue -- volume point of view or are you buying in more. You did have some experience with the revenue target for future times, but 2020 is a long time into the future, a lot can happen until then. Would you think the Siemens is going to be bigger than today as big or lots bigger and perhaps you have some more concrete idea on that? In the same context briefly regarding audiology, what's the IPO date you were thinking about?
Josef Kaeser:

As far as the environment is concerned, obviously, that work really will continue to exist and we're going to work on at comparable level with Alstom, there is a pretty considerable part of the business, which was gone, so we are going to be staying just under the EUR 4 billion target, but after all environments ecology is still very important. So it's not over because there's a certain program that we are not always proclaiming to the public. Sustainability is run by Mr. Busch. We are taking that seriously, we'll continue to run it. Digitalization, I mentioned that in my speech already, digitization is not a value per se, at least not for us. Digitization, the digitization of data of that's something where you have smart, well-selected software, by which you can turn data into a value for the customer, that's really where the big difference is. Sometimes you hear software and IT companies talk about this, so you have companies from the investment sector talking about it. And that's why they are different from us. A customer doesn't buy a weather forecast because they want to know there's lots of wind in the North of Germany and that means you can get electricity cheaper. That would be something you can read from the data. But we know there's so much, so many hours sunshine, solar power and you can calculate all these and evaluate it, but it's not a value as such in and of itself, and yet, let's say you have the information that tomorrow at 2
Unknown Analyst:

Would the company be bigger than now in 2020?
Josef Kaeser:

I can't tell you that, but it's going to be better. That I can tell you.
Unknown Analyst:

What was the other Audiology?
Josef Kaeser:

Audiology there's some revenue to the volume of something like well, a bit more than 3 digits million range, earning about what is the average earnings of the Sector, it's easy for you to work that out because all the companies concerned are publicly quoted [indiscernible] there would be some, so you can check up what their revenue is.
Operator:

Ladies and gentlemen, we have exceeded our time limit, so let us just allow Ms. Gaezar to ask her question and I ask all of you to understand that we will have to come to an end after that. Ms. Gaezar your last question.
Unknown Analyst:

I have only got one question too. It's a question which concerns the new setup for what used to be the Industry Sector. Am I correct in assuming that, that Sector is going to shrink and a slightly more detail question for the region of Nuremberg. Will this mean that more broaden [ph] is going to be smaller?
Josef Kaeser:

So this is how the sector is working metallurgy that we haven't sort of listed that, especially. The Mitsubishi joint venture will mean it will shrink because we are no longer listing the revenue itself, but we are listing it from within the joint venture, but if you leave that aside and looking just at the core element of automation and drives, which is today's industry automation and drive technologies. If you do that, then the design of the 2 new process industries and drives will entirely and exclusively be setup in order to achieve above average, above market average growth. Because as I said already, when we talk about the digital factory machine control, manufacturing automation, PLM software, all this which is part of the digital factory, that will need to be mapped in a comprehensive way, but also in Food Industry, Food and Beverages sort of thing, we're doing very well. As far as engines are concerned, we have a pretty much a leading position here. So these are divisions, where we have an aggressive growth orientation.
Operator:

Well, ladies and gentlemen, we would like to thank you very much for your interest, the lively debate and also for your patience. We will publish our figures for the third quarter, probably on July 31, when we will meet again, see or hear each other again. We now officially conclude the Analyst and Journalist Press Conference. We invite you to partake of a small snack afterwards, and of course, the wet rooms allotted to you will still be available. Thank you, and goodbye.

Siemens Aktiengesellschaft Q2 2014 Earnings Call Transcript

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Siemens Aktiengesellschaft
Q2 2014 Earnings Call Transcript