Siemens trims medical group portfolio with pending sale of pacemaker unit

August 15, 1994

Move not directly related to cost-cutting driveOf all the major multimodality imaging systems vendors, Siemenshas diversified farthest into nonimaging medical technology areas.The giant German vendor will become somewhat less diversifiedonce

Move not directly related to cost-cutting drive

Of all the major multimodality imaging systems vendors, Siemenshas diversified farthest into nonimaging medical technology areas.The giant German vendor will become somewhat less diversifiedonce the pending sale of its cardiac pacemaker business to St.Jude Medical of St. Paul, MN, is approved by regulatory authoritiesin the U.S. and Europe. Siemens signed an agreement to sell theunit in June.

The vendor's move to sell its pacemaker business was fueledmore by the specifics of that market than by a desire to focuson its larger imaging systems business, according to top Siemensexecutives. However, a need to concentrate scarce R&D resourceson core businesses in a generally tight medical equipment marketwas a factor in the decision, said Erik Reinhardt, president ofSiemens Medical Engineering Group in Erlangen, Germany.

Siemens will continue to provide cardiac catheterization imagingsystems as well as electrocardiogram devices and patient monitoringequipment to cardiologists.

"Today, the pacemaker business is a single-product business.We assumed that in the future, though, customers would expectus to offer not only pacemakers but also artificial vessels, mechanicalpumps and things like that," Reinhardt told SCAN. "Wedo not have any activities in these areas, either in R&D orin our sales force. For that reason, we have said that we wouldnot like to enter into these additional activities. Thereforewe had to sell the pacemaker business."

Siemens' pacemaker manufacturing takes place in Sylmar, CA,and Solna, Sweden. The business brought in about $350 millionin sales revenue last year out of a total of about $5 billionfor all of Siemens Medical Engineering Group.

About 1300 employees will be affected by the sale, or 4.4%of the worldwide medical engineering work force of 29,000. Thelargest number of employees impacted -- 900 -- are based in theU.S. Siemens Medical Systems of Iselin, NJ, has a total U.S. workforce of 6200.

Previous press reports of a $500 million sale value for thecardiac business were off the mark, according to SMS presidentRobert V. Dumke. While the actual price will not become clearuntil the final accounting is completed, it should be in excessof $500 million, he said.

Any company as large as Siemens continually reviews its businessportfolio in light of market changes, Dumke said. Siemens hasno plans to sell off any other businesses at this time.

"We are not looking at buying or selling anything, butwe must always be looking at the dynamics of the marketplace,"he said.

The sale is not directly related to efforts by Siemens andother medical imaging competitors to trim down in a tight market,Reinhardt said. Siemens will continue to work to cut costs andincrease productivity in its core businesses.

"The pacemaker deal has no effect on our cost positionas such," he said. "Improving our cost position is anongoing issue in order to remain competitive in a tough market,as the medical market is today. Our slogan is that we have tobe fit for the future."