Siemens issues profits warning


Siemens issues profits warning

Antony Savvas

Siemens has issued a profits warning after reviewing various contracts across its divisions. This includes its SIS IT outsourcing business lost a major 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.

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