(Bloomberg Gadfly) -- The listing of a minority stake in Siemens AG's healthcare technology unit was a pretty muted affair -- and not just because trading didn't start on time for technical reasons.
That's a good thing, in part. Spandex-clad dancers cheer-led the unit's re-branding as "Healthineers" in 2016. You can relive the horror here.
Siemens will be disappointed, though, that investors haven't been much enthused by the IPO. True, the shares got a more than 6 percent bump at the open, but an enterprise value of about 35 billion euros ($43 billion) is well short of initial hopes of up to 40 billion euros.
This creates a problem for Siemens boss Joe Kaeser. His strategy is based partly on spinning off businesses to try to give them more entrepreneurial freedom and remove the parent's conglomerate discount. The shine of that approach is wearing off. Siemens shares have fallen almost 20 percent since touching a record high in April.
Including debt, Siemens trades on about 10 times forward Ebitda. That's in line with Switzerland's ABB Ltd, but a big discount to its struggling American rival General Electric Co (on 13 times). Rockwell Automation Inc., which just does automation, is on 15 times. So what's up with the Germans?
Like GE, Siemens is suffering from lower demand and brutal competition in big gas turbines, which means earnings probably won't grow this year, according to the general view of analysts. "There's broad agreement that Siemens is worth more on a sum-of-the-parts basis," says Ben Uglow at Morgan Stanley. "But valuation arguments take a backseat when earnings momentum is negative."
Kaeser's been undermined by poor execution too. The merger of the Siemens wind unit with Spain's Gamesa was followed by the loss of several managers and a string of profit warnings. Co-owner Iberdrola is unhappy.
So some investors are asking whether allowing these businesses more entrepreneurial slack is a good thing. The Siemens Gamesa board lacked wind industry experience. With Siemens still clinging to majority stakes in diverse businesses such as trains, wind turbines and medical scanners, investors aren't willing to accord a higher valuation to the core automation and industrial software divisions.
Kaeser is better at understanding capital markets than most German managers, and his so-called "fleet of ships" strategy is better than doing nothing. It's politically more viable than a full break-up, which would no doubt have the unions and Berlin demanding his head. But, with Healthineers failing to spark the Siemens share price, what should Kaeser try next?
He could use some of the Healthineers proceeds (about 4 billion euros) to buy back stock. Not a bad move when your share price is in a funk. Finding a partner for the struggling large gas turbine unit is worth considering. Analysts suggest a joint venture with Japan's Mitsubishi Heavy Industries Ltd.
Right now, the market is telling Kaeser his flotilla hasn't reached port. If he wants to avoid that painful break-up, the skipper needs investors back on board.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Chris Bryant is a Bloomberg Gadfly columnist covering industrial companies. He previously worked for the Financial Times.
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