Detroit, home of Ford, General Motors and Chrysler, became a symbol of industrial decline decades ago. Tens of thousands worked there for the Big Three of the US auto industry until the 1980s, before one factory after another closed. What remained were deserted suburbs and lots of frustrated workers. Here, of all places, in the middle of the Rust Belt Siemens-Boss Roland Busch (59) have just discovered the future.
Siemens announced on Wednesday evening that it would purchase the software company Altair for 9.4 billion euros. Siemens has never spent more money on a software investment. Of course, Busch couldn’t help but describe the purchase as a “significant milestone” because it underscores the Group’s commitment to “accelerating the digital and sustainable transformation of our customers by connecting the real and digital worlds.”
Siemens is hoping for a billion-dollar increase in sales
Or expressed in numbers: Siemens hopes for 8 percent sales growth in its digital business. In the medium term, the sales contribution is expected to grow by more than 500 million US dollars per year, and in the long term even by one billion. This hope was fueled again late on Wednesday evening when Altair reported its sales figures for the past quarter, which amounted to a good 150 million euros. An increase of 13 percent compared to the previous quarter.
In the 1980s, not only body builders worked for General Motors, but also young engineers like James Scapa (67). He left the company in 1985 and founded Altair Engineering together with two companions. He will have fond memories of the Rust Belt; his 40 years at the helm of Altair made the son of Greek immigrants a two-time billionaire, according to Forbes.
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The big winner: Altair founder James Scapa can cash in
Photo: Altair
Siemens initially costs the company a lot of money, which the company can largely pay for from existing cash resources.
Still too expensive to spread euphoria on the stock market. Siemens shares fell before the management trio, which also includes CFO Ralf Thomas (63) and digital director Cedrik Neike (51), explained their coup to investors and journalists on Thursday afternoon.
Busch nurtured the narrative of a perfect match. However, you first have to know what Altair is about.
Scapa once explained the essential capabilities of his software as follows: It makes it possible to build models and structures that have the elegance of a human skeleton. What’s special: Materials or entire products can be exchanged at the push of a button. An aluminum bicycle then becomes an e-bike and an e-car becomes a hybrid vehicle. Siemens is also a leader in this field. Real factories are becoming reality for a long time copied into the digital world
and then optimized on the computer so that building materials can be saved or energy can be saved in operation.
With the help of Altair, optimization will go one step further in the future.
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Perfect addition? In any case, digital director Cedrik Neike conjures up huge synergies between Altair and Siemens
Photo: Sven Hoppe / dpa
Anyone who builds a smartwatch today using Siemens software has no idea what will happen if the watch comes off the wrist and falls on a stone. “With Altair’s structural simulation, we can now accurately predict how the watch will react to falls from a height of up to 6 meters,” says people close to Neike. Manufacturers can therefore think carefully about how robust they build their products and what materials are necessary in order to make warranty cases as rare as possible.
Altair can also complement car batteries, which are often designed and manufactured using Siemens technology. The company provides crash analyzes that can help car companies increase the safety of their vehicles.
Next to artificial intelligence
Altair recently entered the quantum computing business and, together with researchers from the Technical University of Munich, is working on the superiority of the new technology over conventional computers. If the industrial breakthrough succeeds, numerous DAX companies hope Startups on a billion dollar business.
“How is this going to pay off?” ask analysts
All of this sounds almost too good to fit into the depressed German industrial debate. And investors’ enthusiasm was initially limited on Thursday. In internal briefings from a fund company, which manager magazin was able to see, the analysts wrote to each other: “We want Siemens to strengthen its digital jewel,” but: “How on earth is that ever going to pay off?” The investment bank Morgan Stanley was also skeptical in an analyst report: You can see the strategic advantages, but the valuation is quite ambitious, and questions remain as to “how Altair’s valuation can be maintained within the Siemens structure.”
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More than just a software factory: The fusion of factory business and digital products – like here in Amberg, Bavaria – is Siemens’ big promise to investors
Photo: Armin Weigel / dpa
Siemens will pay twice as much for Altair as it did in 2016 for the similarly sized Mentor Graphics. Even back then, newspapers commented on the acquisition of Busch predecessor Joe Kaeser (67): “Bargains are not the Siemens boss’s forte.”
More on the topic
But today they know in Munich that it was precisely this purchase that massively increased Siemens’ digital clout. For Busch, the deal must also feel like a liberation. Although the core company Siemens has invested more than 20 billion euros in software companies since 2007, investors often didn’t really believe Busch when he advocated the merger of hardware and software.
But now the Siemens boss is creating facts and is firmly convinced that he will not frighten either shareholders or employees on Halloween Day 2024. Those close to him say that he was initially surprised at how perfectly Altair fit into the world of Siemens. And this explains why the biggest pearl in the Siemens Group will have its home in the Rust Belt in the future.