http://chicksinthehuddle.com/2012/04/24/anonymous-sources-can-suck-it-says-anonymous-source/

Siemens: Deep Throats Shout it Out

The last Siemens post drew a number of comments, not all complimentary but all useful to the burning question of “What’s up with Siemens?”  In economic-speak, there is a shortage of facts and a surplus of speculation in the air and on my desk.  Today, Hearing Economics turns the microphone over to well-informed industry insiders to speculate.

Note to potential commentators:  The stories you are about to read are not yet true, but they could be someday.  The names have been changed to protect those willing to go out on a limb and voice their informed opinions ahead of time. The Deep Throats do not represent a scientific, or even an unscientific survey, but they are all people who have held long-time, high-ranking positions in the hearing industry and the hearing care professions, and who have done work related to Siemens during their careers. 

What’s Up With Siemens?

 

Audiologists do not get courses in finance, which can make for confusion in times like this. Here are a few points of reference to help follow the nomenclature, comments, and discussion.

  • Siemens is a public company called Siemens AG.
  • Its stock trades on the Frankfurt stock exchange under the symbol SIE.
  • It is represented on the Xetra electronic securities trading platform for global exchange, under the symbol SIE:GR.
  •  Xetra is based in Frankfurt, was created for the Frankfurt stock exchange, and is operated by the joint stock company Deutsche Börse{{1}}[[1]]In English, a bourse is an exchange for stocks, derivatives, etc.  It’s a common term in Europe; also in the diamond trade.[[1]], and is licensed to handle global transactions for over 14 different stock exchanges.
  • An IPO is an “initial public offering” of stock in a new company or a private company that is going to go public (i.e., start trading on a stock exchange).

Is This an IPO?

 

Maybe.  One journal article this month describes Siemens at a fork in the road, deciding between two paths. Those are the same paths recommended to Siemens by the Wall Street Journal back on 3/18/2010, when Siemens was losing market share to Oticon and Sonova.

  • Path One: Siemens Audiology is spun off as a separate company on a stock exchange, owned in part by current Siemens shareholders.
  • Path Two Has Siemens Audiology offered on a securities exchange in an IPO to the general public to attract new buyers.

Siemens and its shareholders benefit by owning shares in the new company (Path 1) or getting a cash infusion for shedding it (Path 2).  Either way, there is no indication which stock exchanges would trade the stock.

What Strategy, Which Path?

 

Those in the know are divided in their opinions on most points:  how Siemens should proceed, what it’s selling, what it’s worth, the value of the name, where the sale will occur, and who wants to invest.

IPO or Spin Off?

Deep Throat #1.  Siemens Corporate is interested in spinning off the whole kit and caboodle. They will try to present a comprehensive hearing health company in order to maximize the attractiveness to potential investors.  They may even be willing to lend them the use of the Siemens name for a few years just like AT&T did with ReSound initially – but in this case, the benefit of the Siemens brand to this market is negligible, especially when they see what conditions come attached to the use of the brand.

Deep Throat #2:  The IPO deal of Siemens might be unfolded in Europe rather than here in the US — this could be an opportunity for them to run their own show, maintain the brand, and basically improve their lot [in the US? or worldwide?].  Siemens is way behind the others in technology, and a stand-alone company is only as good as its CEO.

Deep Throat #3:  Over the past 3-6 years, Siemens’ market share in the hearing aid industry has declined considerably while other suppliers have seen an increase in their market shares. As a rule, fewer suppliers equates to fewer choices and decreased demand. If Siemens can acquire funds and complete a restructure, the hope is that it will increase the supply of devices to the market.

Deep Throat #4:  Siemens is a very admirable company, but has no interest in staying in hearing. So, I’m a little surprised to see that they announced that they plan to own 20%{{2}}[[2]]Readers, I do not know where this was announced.  If you have that link, please send it and I’m improve the post[[2]] and allow use of the Siemens name. Maybe they’re doing it to show they have confidence in the company, and a means of selling. Maybe in a few years they’ll remove themselves and the use of the Siemens name, same as they did with the cell phone spin off a few years ago.

Spin or IPO

It’s a tie and Siemens’ chosen path remains as uncertain as when you started reading this post.  I don’t really think Table 1 means much of anything.  There are references to a “partial IPO,” which is a mix of the two options in Table 1 (e.g., Siemens owns part of the new public company).  However it comes down, it will probably end up being a mix of cash and shared ownership with Siemens for awhile.

Why’s That?

 

Siemens will likely stay involved to some degree for no other reason than because it can’t get out, at least not at a price it’s happy with, or at least not right away.  It’s unclear what companies will or can invest, but it may not be any of the Big 5.

DT #1:  None of the European hearing aid manufacturers dare to take over Siemens Audiology following the problems that occurred with the German antitrust authorities when Phonak tried to merge with GN ReSound a couple of years ago, so a new owner would probably be a company from outside the industry.

DT #2:  I don’t know any group interested in buying them —  except for their customer list….  I’m probably (for sure, actually) not going to be an initial investor!

DT #3:  I can’t imagine why Starkey would buy Siemens other than their international status to further develop their own market share — but they might find themselves competing against their own partners in foreign countries– not a good situation.  There is no technology there that Starkey wants.

DT #4.  Siemens is probably still kicking itself for not taking the KKR and Cochlear bid back in 2010.

 What’s For Sale?

 

That remains to be spelled out.  I would like to know whether the sale will include any/all patents of Siemens Audiologische Technik GmbH (Erlangen, Germany).  Does anyone know?  Deep Throats are silent on this question.  

Otherwise, the main question is HearUSA, which is already sort of its own company.

DT #2:    And, what about the HearUSA retail organization —  is that part of the IPO?

DT #1:  I don’t see any benefit to Siemens in parceling off pieces of the division- especially HearUSA after all of the drama attached to the acquisition.

Breaking Up Is Hard to Do

 

I think most will agree with DT #4 that Siemens is an admirable company.  Our industry has benefited from its presence for many years, as have consumers fitted with their products.  Economically, our industry, dispensers and consumers have benefited by having more competitors and more product choices in the marketplace.

Some of us are sorry to see them leave, especially after the calm dignity they displayed while enduring the HearUSA tussle.  The DTs agree that the HearUSA tussle, along with slipping market share, underlie Siemens’ decision to leave.

DT #1:  They’ve wanted to divest themselves from the hearing aid business for years now and I believe they will finally do it now that the audiology division falls clearly outside of the company’s newly defined strategic focus. They have never been comfortable with industries that get too close to the consumer, and the hearing industry dragged them uncomfortably closer and closer to the general public.

DT #3:  The Audiology business conflicts with Siemens current goals, though it’s a hard decision due to its sentimental value. It was founded by one of the two founding brothers of Siemens.

And there you have it.  Siemens is just not that into us.  We wish them luck.  Ditto for Siemens Audiology and even HearUSA as it parties on.  There’ll be one more post on that, eventually.

 

feature photo courtesy of chicks in the huddle

About Holly Hosford-Dunn

Holly Hosford-Dunn, PhD, graduated with a BA and MA in Communication Disorders from New Mexico State, completed a PhD in Hearing Sciences at Stanford, and did post-docs at Max Planck Institute (Germany) and Eaton-Peabody Auditory Physiology Lab (Boston). Post-education, she directed the Stanford University Audiology Clinic; developed multi-office private practices in Arizona; authored/edited numerous text books, chapters, journals, and articles; and taught Marketing, Practice Management, Hearing Science, Auditory Electrophysiology, and Amplification in a variety of academic settings.

1 Comment

  1. Having just discovered this article, I have four salient comments:

    1) When GN unloads ReSound, watch for Cochlear to grab them, as they have been licensing their 2.45 gHz wireless technology for over two years;

    2) Starkey may indeed be looking at Siemens, as they have a competent ASIC design staff, while Starkey uses FPGA technology.

    [Field Programmable Gate Array technology allows you to get a given design, such as a hot new DSP algorithm, to market faster and also correct any bugs with flash updates, while Application-Specific Integrated Circuits require 9-30 months to develop and validate; plus any bugfixes are made by changing the masks and then soldering in the new chips when afflicted aids are returned for service — Ugh.];

    3) The trend in the industry is to have a full product line: Sonova bought Advanced Bionics in January 2010, Wm Demant bought French CI manufacturer Neurelec and rebranded it as Oticon Medical, and Cochlear has been on the prowl as they already bid for Siemens 4 years ago. Innsbruck-based Med-El has sworn they are staying independent; but they could be a small fish that swallows a big fish (like AirTran did with ValuJet in late 1996);

    4) Who said their sale has to be an incestuous deal, anyway? Apple got the jump on the industry with their “Made For iPhone” initiative, and a tech behemoths such as Samsung, Google, or even (gasp!) Amazon can swallow up a minnow like Siemens Audiologische Technik without even a hint of indigestion~

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