November 11, 2012

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There’s a common line of thinking that suggests that diversification only ever spreads risk.

Papering over potentially unpalatable projects and making it easier for new market participants to take a punt on a technology, without the fear of getting their fingers burned.

Only that’s not always the case. And increasingly there’s a line of thinking that assumes that while yes, diversification can spread risk, it can also create it.

Take Siemens, as a case in point.

Announcing its annual results earlier in the month, the German manufacturing giant celebrated a 3% revenue rise, taking the firm to €78.3bn. This, combined with a longer-term ambition to return profitability to a minimum of 12% by 2014, suggests at first glance that this strategy of diversification has been paying off.

However, let’s not forget that Siemens decided to exit the solar market – a loss making business unit for the firm – in its final financial quarter.

And moreover, that the firm looks likely to take a tighter rein on its asset portfolio over the next twelve to twenty four months, with further acquisitions and sell offs inevitable.

As such, and given the increasingly strong performance of its wind energy unit, perhaps the latest set of results suggests that there’s wider market shift afoot.

After all, the world’s ninth biggest turbine manufacturer by sales hasn’t shied away from outlining the sheer size and scale of this particular market challenge.

Or indeed from committing significant investment and company resource to the development of its mammoth 6MW offshore turbine– currently undergoing early-stage project trials in the North Sea.

However, the manufacture, sales and delivery of such enormous infrastructure requires some seriously focused thinking, with deep pockets to boot. And while the division remains brimming with potential, to truly succeed it requires the ongoing backing and commitment of the wider board.

Given the exit from the nuclear and solar markets and with an increasing focus on smart grid, water and wind, for Siemens Energy this strategic shift behind the scenes may already been paying off.

However, for Siemens and for many of its industry counterparts, sector success is as much dependent on internal commercial focus as it is on the wider dynamics of the wind industry at large.

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