Siemens has issued a profits warning after reviewing
various contracts across its divisions. This includes its SIS IT
outsourcing business lost amajor contract with the Department for Work and Pensions
(DWP)earlier this month.
Siemens has written off £676m in contract values, including the
DWP deal which was originally worth around £90m.
The DWP project was cancelled after getting heavily behind
schedule with costs spiralling to an estimated £153m.
Siemens had been tasked with providing a central payments system
to handle benefits, along with ongoing system management and
maintenance.
Siemens
won the contract in early 2006 and part of the deal was system
support until 2010.
The company failed to have the system ready by the October 2006
target date, and, according to a written parliamentary answer on
the DWP problems earlier this month, it wasn't expected to be ready
until December 2010.
Georgina O`Toole, an analyst at
Ovum, said, "Unlike the other troubled divisions, SIS's loss is
down to a single isolated project cancellation, and is not a sign
of widespread contractual delivery issues."
"The key issue is that Siemens was hoping to use its experience
at DWP to offer similar solutions to client recipients of DWP such
as Jobcentre Plus and other "funds flow" organisations, such as
HMRC and Defra. This cancellation therefore has broader
implications," she said.
The DWP was
recently criticised by parliamentary watchdogs over the way its
fraud detection systems had actually lost the organisation
money.
Siemens said most of the profit write downs and the subsequent
profit warning are attributed to the company's Fossil Power
Generation and Mobility divisions.