Siemens, the leading German engineering manufacturer, warned that its 2005 earnings can take a dip on the cost of handset unit restructuring.

Siemens’ new chief executive Klaus Kleinfeld revealed the plan to spin off the unit that posted loss of €138m (£94m) in the second quarter. Sales plunged 27% and the business is now in the sixth place in the world. The Siemens Group as a whole posted record profits last year.

"At present, it’s hard to put a figure or a time limit on the further burdens that these measures will generate," Kleinfeld said.

Hans-Joachim Neubuerger, the chief financial officer, said this is not a profit warning ans said the group merely disclosed some of the trends. "We would like to be more specific but we can’t be," he said.

The company’s operating profit added 2 percent ending at 1.098 billion euros ($1.44 billion), missing analysts’ forecast of 1.228 billion euros. Net profit topped the expectations with 781 million euros.

"We thought we could achieve -- under certain conditions -- another slight rise in (full-year) earnings. Today, this is difficult to assess," Chief Executive Klaus Kleinfeld said in a news conference.