Siemens will cut 6,800 jobs at its corporate telecoms unit -- two-fifths of the unit's workforce -- to reshape the business into a software provider as it seeks to divest the division, it said on Tuesday.
The German industrial conglomerate said in a statement it planned to cut 3,800 jobs worldwide at its Siemens Enterprise Networks (SEN) business, including 2,000 in Germany.
It expects to reduce staff by a further 3,000, including 1,200 in Germany, through outsourcing and partnerships.
Shares in Siemens gained 2.6 percent to 91.01 euros by 10:38 a.m. London time, outperforming a 1.6 percent gain on the German blue-chip DAX index.
Siemens said rapid change in telecommunications made restructuring "absolutely essential and supports Siemens' ongoing efforts to find a suitable partner" for the loss-making unit, which it has been trying to sell for years.
It is aiming for a strategic alliance or a sale to a financial investor who will keep the business running.
"We estimate restructuring charges in the mid-to-high hundreds of millions of euros. As the measures were not unexpected, they should have a limited effect," Theo Kitz of Merck Finck said in a note.
SEN, which specialises in communications systems for large corporations, has suffered from the rise of Internet telephony.
Sources with knowledge of the matter have told Reuters that Siemens is negotiating with competitors Alcatel-Lucent and Nortel as well as financial investor Cerberus about a possible sale or merger of SEN.
Siemens said the job cuts are intended to accelerate the company's transformation from hardware supplier to a software and solutions provider to fit changed market conditions.
The division has been on the block ever since Nokia and Siemens agreed to combine the bulk of their telecom networks businesses in 2006.
Siemens, whose cornerstone was laid when founder Werner von Siemens invented the pointer telegraph more than 160 years ago, has moved away from its roots as telecoms markets have grown more cut-throat in recent years.
End of Manufacturing Line
As it changes to a software provider, SEN will give up its own manufacturing operations, Siemens said.
In Germany, it plans to sell or find a partner for the SEN plant in Leipzig and seek a partnership with an IT provider for its direct sales to customers for small and mid-sized systems.
Abroad, SEN hopes to sell or find partners for its facilities in Thessaloniki in Greece and Curitiba in Brazil but said a closure of the plants could not be ruled out.
Call centres in Argentina, Chile, Colombia, Ecuador and Peru were not part of SEN'S core portfolio and are slated to be sold, Siemens said.
SEN's results are reported under "discontinued operations" in the group's financial statements. Siemens valued the unit at 567 million euros ($840 million) at the end of its last financial year, last September.
Siemens is streamlining its entire business and hopes for an end to a U.S. corruption probe that has rocked it since 2006.
The Securities and Exchgange Commission is investigating whether employees of Siemens, one of the world's largest electrical and industrial engineering companies, paid hundreds of millions of euros in bribes for telecoms and other contracts.