I’ve been doing a fair amount of work with Siemens of late, and have the chance to pick the brains of their management team in informal surroundings, so I certainly know how delighted they all are that at long last Siemens AG has done a deal, but will the deal actually change anything?

I spoke to the CEO Thomas Zimmerman on 30 July, the day after the announcement. I asked him what would be different under the recently announced JV with The Gores Group that Siemens Enterprise Communications could not do on its own. He talked around speed of investment decision making, channel to market flexibility and easier headcount management.

Siemens has a great product but is let down by a high cost base, slow decision making processes, inefficient distribution channels and a poor image resulting from two years of uncertainty since the then Siemens AG CEO Klaus Kleinfeld announced on June 19, 2006 that Siemens Enterprise Networks (aka Enterprise Comms) was up for sale. Zimmerman and team have made a very good start over the last 2 years since the Enterprise Comms business was carved-out of the parent company, but could only do so much while still part of the Siemens group. With the right management team Gores could fix all these, but they’ve paid a fairly fancy price for a business that is losing market share. However, the market is getting tougher for all the competition and not all the current vendors will survive. Avaya were in much the same condition before the VC buy-out. In particular, Siemens is weak in the US, where the Enterasys connection that Gores are bringing to the party might help a bit.

A threat to Cisco’s dominance? Hardly. Better than leaving it inside Siemens? – I definitely think so, but it all depends on the quality of the new team and how well they execute. Long term prognosis? Wait and see, too early to make a call.

By Phil Sayer

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