Dive Brief:
- Siemens has begun taking steps that would prepare the engineering giant to spin off its $18-billion healthcare unit.
- The process will begin with Siemens creating individual healthcare units in various countries, including Germany, legally independent of Siemens AG, sources told Reuters. This new structure would allow legal separation of the entire healthcare division from the rest of Siemens.
- The healthcare division, which makes gear for medical imaging, clinical IT systems and in-vitro diagnostics, is Siemens' most profitable, accounting for 18% of 2013 and sporting a profit margin of 20%. But Siemens leaders are afraid that it will take large investments to keep markets in healthcare high-margin as it competes with rivals like General Electric and Phillips.
Dive Insight:
While Siemens hasn't officially announced the breakdown and sale of its healthcare unit, it has already been making moves in that direction. For example, in July Siemens said it would sell its microbiology business to Beckman Coulter Inc. for about $414 million, then in August the company made plans to sell its hospital IT business to Cerner Corp. for $1.3 billion.
But the sale of the entire healthcare division would obviously have a wider impact, which includes giving more competitive latitude to competitors like Philips NV and General Electric. It will be interesting to see if Siemens exits even its lucrative medical imaging and diagnostics unit, as anyone who buys this unit will have to pick up the pace pretty quickly. Otherwise, it seems likely that Siemens' competitors will go after and maybe destroy Siemens' former pride and joy.