Siemens' IT services chief arrested in illicit payments inquiry

The arrest of a top-ranking official responsible for Siemens IT Solutions and Services (SIS), its IT services business, will not affect daily operations at the unit, according to the company.

Police detained Johannes Feldmayer as part of an investigation into payments from Siemens to the head of the AUB trade organisation. The German electronics and engineering company has confirmed the payments.

The case is not related to the much larger investigation of corruption in the company's communications division, which is being merged into a new networking venture with Nokia. Siemens has confirmed a flow of transactions that may have been used in bribes.

The allegations of corruption come at a bad time for Siemens. CEO Klaus Kleinfeld, is trying to win the support of customers, investors and technology partners for a new focus at the company. Siemens is moving away from low-margin manufacturing areas, such as telecommunications equipment, computers and chips, to areas it views as potentially more profitable, including factory automation, power generation and automotive systems.

IT services is also part of that strategy. Kleinfeld has bundled all of Siemens' worldwide IT services and software activities, including the former money-losing Siemens Business Services (SBS), into the new entity. His argument is that by combining all IT services and software development across Siemens, the new unit will be in a stronger position to provide comprehensive and complex systems and services from a single source.

Outsourcing, a core business of SIS, accounts for nearly 60 percent of sales in the new group, followed by IT services, such as systems integration and SAP software implementation, at 35 percent. Software development generates the rest of the group's sales of around €5bn (£3.4bn).

The new joint venture Nokia Siemens Networks will officially launch on 1 April, Langendorf confirmed.

The launch of the new company had been pushed back a couple of times as the result of the corruption probe against executives at Siemens' networking division over accusations of bribes offered to secure business.

The company will have a combined customer base of around 600 companies, with half of them mobile operators and the other half fixed-line operators.

Copyright © 2007 IDG Communications, Inc.

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