Siemens announced a fall in profits on the back of a slide in sales of mobile phone handsets yesterday.

The German group's new chief executive, Dr Klaus Kleinfeld, said Seimens would break the business out of its communications division prior to seeking a partner for it.

Group net income was down to €781 million in the company's second quarter, from €1.21 billion a year earlier. The earlier figure was boosted by the sale of Siemens's stake in former chip unit Infineon Technologies.

Mobile sales were down almost 25 per cent for the period to the end of March, from 12.8 million units over the corresponding period last year to 9.3 million. The mobile business posted a loss of €138 million, bringing the overall profits for the communications group from €146 million to a loss of €19 million.

Dr Kleinfeld would not speculate as to the exact nature of a future partnership, but did promise that the company would continue to produce phones under the Siemens brand name. Siemens is expected to only retain a minority stake in the business under any new deal.

Confidence in the brand was affected by a health scare regarding the company's 65 range last August, which forced a recall and severely dented sales for the Christmas period.

Siemens has also been slow to develop handsets to accommodate new 3G technology.

Overall, orders for the company rose 5 per cent to €20.7 billion and sales increased 4 per cent to €18.6 billion.