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New CEO for Siemens Enterprise Communications Confirmed

Siemens Enterprises Communications (SEN Group) today confirmed in a press release the appointment of Hamid Akhavan as its new Chief Executive Officer, with full transition to the role by late February. Mark Stone, interim CEO over recent months will resume his duties as Executive Chairman and remain part of the Executive Board.When Mark Stone assumed the duties of CEO following the departure of James O'Neill earlier this year his appointment was not designated as "interim," but most industry analysts, like me, rightly realized that it would be difficult to perform double duty in his dual roles at Gores Group and SEN Group for an indefinite time period. With today's formal announcement we now know that a search process for a new full-time CEO was secretly underway.

The fact that the chosen Mr. Akhavan was the COO of Deutsche Telecom in Siemens AG's backyard should not be too surprising. Though Gores Group is the majority stakeholder in SEN Group, Siemens AG still retains a 49% interest. t goes without saying that the relationship between the two German companies has been very close for many, many years and that Akhavan was most likely a known entity.

Prior to joining Deutsche Telecom as the CEO of T-Mobile International AG in 2006 Akhavan was Chief Technical Officer and Chief Information Officer at Teligent Inc, an international broadband fixed and wireless access company, and held various positions at other technology companies. Though he may not have held a top tier corporate position at an enterprise communications company such as SEN Group, he undoubtedly has knowledge and experience with the market's products and applications based on his background. Akhavan brings corporate-leader management skills to his new position. His focus at SEN Group will be strategic, because he was not hired to help design new products and write software code.

Akhavan will arrive at SEN Group at a time when the enterprise communications market is about to enter a new phase in its history. Though IP telephony systems have been around for the past decade, the full potential of the architecture design and IP-based communications in general have not yet been realized: the core infrastructure is being put into place, and customers will next learn how best to leverage the technology through implementation of new cost savings and productivity enhancing applications.

At the same time an 800-pound gorilla in the guise of Microsoft is getting ready to pounce onto the scene as a full-fledged competitor planning to replace installed product, not merely supplement them. Avaya's acquisition of Nortel Enterprise Solutions (ES) will also change the equilibrium of the market, and HP's acquisition of 3Com will also bring them into the telephony market (though as a relatively secondary competitor) if that is their desire. In the meantime, Cisco continues to expand its communications and collaboration portfolio to build on its past decade of success. All the while, the market is in a wait and see mode watching out for Google, a potential future competitor with the resources and determination to effect major change. Akhavan's future of SEN Group will be an interesting one, to say the least.

What are the primary challenges Akhavan faces in his new CEO role? Several come easily to mind:

1. Maintain and expand the installed customer base that was negatively affected the past few years while the business unit was in turnaround mode until Gores Group stepped in last year. One of the most valuable business assets of any company is its customer base, and Siemens has been under attack by competitors such as Cisco and will face new attacks by competitors such as Microsoft. Fortunately for the new CEO, Siemens shipments have been moving in a positive direction this year, though they are still off from several years ago, even discounting external economic factors.

2. Place greater corporate focus on the North American (NA) market, where Siemens' market share has dropped about 85% during the past two decades. Siemens has remained a very strong competitor in the EMEA and CALA geographic markets, but has lost much ground in NA, a market characterized by its size and leading edge implementations of new enterprise communications technology. Siemens cannot retain its position as a global market leader if it cannot regain ground in NA during the next few years.

3. Improve the image and perception of Siemens as a market leader and product innovator, because this image was badly damaged when the fate of the company was in limbo for more than two years. More than a few customers looked elsewhere for business partners, affecting existing and potential future customers. The sudden departure of O'Neill after a very short tenure as CEO did not help matters. Customers demand stability and future viability from their suppliers, and Siemens must demonstrate and prove these two characteristics to continue its very long market tradition.

Despite the recent setbacks, Siemens next year will still have the second largest installed global customer base behind Avaya/Nortel, as measured in line stations, and a strong portfolio of products and solutions. It is also has a highly recognizable name, and its ongoing corporate ties to Siemens AG should not be dismissed lightly. As long as the Siemens name remains on SEN Group offerings, its reputation will be protected at virtually all costs, because there would be much to lose from customers who depend on the company for a very wide range of business products and services. Siemens as an enterprise communications system supplier also has extremely strong global market coverage, much through its direct sales/service operations, though it needs to shore up its NA market presence. In consideration of these issues,