An interview with Klaus Weßing: Gigaset is excellently positioned moving ahead

9. July 2018 Published by Raphael Doerr

Gigaset’s future is very bright. But it wasn’t always that way. A tough decision that the company had to take at the end of 2015 and whose effects proved a challenge for the new CEO at the time, Klaus Weßing, marked the turning point.

Gigaset’s revenue in the first half of 2015 slumped by 3% to €143 million, while the market for DECT (Digital Enhanced Cordless Telecommunications) telephony, traditionally Gigaset’s key niche product, continued to contract and finally went into free fall.

In view of such gloomy prospects, the days of the German telecommunications company seemed numbered. Gigaset was no longer able to rely solely on its core business, DECT telephony.
In November 2015, the company therefore took the tough and drastic decision to axe 550 jobs over the following three years – or almost half of the 1,250 strong workforce at the time. Half of those cuts were made at headquarters in Munich and at the Bocholt site.

First major strategic realignment

One month later Klaus Weßing was appointed the new Chief Executive Officer of Gigaset. Upon assuming the post, he had only one thing in mind: stabilization. The job cuts, the first major strategic realignment since the company parted ways with Siemens more than ten years previously, would determine whether Gigaset found a path to a more stable and sustainable future.

Gigaset justified the cuts by citing the increased efficiencies they would generate, in particular in internal processes between production and sales. “We had to stabilize the company to secure its future,” said Weßing. “Of course, the resulting uncertainty provoked huge unrest at the company.” At the same time as Weßing was made CEO, Hans-Henning Doerr was also appointed to Gigaset’s Executive Board as CFO.

An added aspect at the time was that Gigaset could no longer ignore the expanding smartphone market – a line of business with which the company had no longer been involved since the carveout from Siemens and in which it only began to operate again in December 2016. “We had to stabilize the company to secure its future.”

“We will invest more strongly in new growth areas and also press ahead with digitalization at the company and in our solution portfolio,” adds Weßing. “Digitalization has the potential to help us achieve our goal of continuing to inspire our customers with sustainable and top-class tailored communications solutions.” Gigaset is aware that a fundamental change in strategy should be carefully thought through.

Longstanding problems are addressed

That was voiced with particular clarity in the Letter to the Shareholders in the 2016 Annual Report. Here is an excerpt: “It was finally time to address the longstanding problems that were weighing heavily on our company. It was also time to concede that long-promised goals in the growth segments of Home Networks and Business Customers had not been attained. Gigaset’s reputation was at stake.”

Gigaset’s further development vindicated its extensive strategic realignment. The provisional figures for fiscal 2017 show an increase in consolidated revenue across the whole year to €293.3 million or by 3.9% over 2016, while EBITDA has risen by 4.4% to €26.1 million.

“We have fundamentally reorganized the company in the past two years and extensively implemented our new operational strategy geared toward new growth areas such as mobile devices and business telephony. The results show Gigaset is on a growth trajectory – for the first time in years,” states Weßing with pride. “We have fundamentally reorganized the company in the past two years. The results show that Gigaset is on a growth trajectory.”

Investment in long-term partnerships

Gigaset nurtures extensive partnerships with suppliers in China, some of which have endured more than 20 years, and runs a branch in Shanghai. Continuing those partnerships with China is vital to the company’s future sustainability.

“We procure around 70% of our electronics components from China,” notes Weßing. “The team there cooperates excellently with our local R&D team.” The partnerships with China also play a key role in Gigaset’s efforts to capture relevant market share in the smartphone sector.

The dominance of the long-established smartphone giants Apple and Samsung has been eroded significantly over the past years. Chinese players like Huawei, Oppo and Vivo now account for a large slice of the smartphone market.

Gigaset’s portfolio offers more than 1,600 product variants (250 of which have been launched in the past year alone) and comprises not only DECT phones, but also smartphones and smart home accessories such as alarm systems, smoke detectors and motion sensors.

“Unlike many of our competitors in the telecommunications industry, we produce hardware that lasts a whole lot longer than just a year,” stresses Weßing. “The basic prerequisites for that are a high affinity for top quality, design and processes, as well as the use of sustainable technologies that are long-lasting, lightweight and recyclable and have a low carbon footprint.” “Unlike many of our competitors in the telecommunications industry, we produce hardware that lasts a whole lot longer than just a year.”

New strategy and a wealth of opportunities

Gigaset’s new strategy is paying off – specifically for its shareholders and, in the figurative sense, for the Executive Board. But at the same time, the company also understands that it cannot and must not completely abandon its core identity. That’s why Gigaset is sticking by the product that made it a leader in the first place: the DECT phone.

“We have a wealth of opportunities, whether in the field of smartphones, business telephony or future communication. Our company is excellently positioned moving ahead. Yet even though these new segments offer enormous growth potential for Gigaset, DECT phones are our core business and will also remain so,” emphasizes Weßing. Now that Gigaset has emerged from its downturn, it is clearly back on the road to success and can once more look to the future with its customary confidence and dauntlessness.

This text is translated from a German version of an interview conducted with Klaus Weßing by the CEO Magazine. You can read the original interview in English here.