(Writes through, wraps SBS, Siemens Mobile, VDO elements)
By Georgina Prodhan
FRANKFURT, Feb 17 (Reuters) - German conglomerate Siemens presented an upbeat mid-quarter picture on Tuesday with its biggest units thriving but said it would keep cutting costs by shifting employment to low-cost regions.
Siemens, whose products range from X-ray machines to trains, said innovations would drive growth at the company, which last month posted flat quarterly sales as the strong euro and pricing pressure weighed.
Siemens Mobile, the biggest of the company's divisions, said it expected to sell more handsets in the current quarter than in the year-ago period thanks to new designs as it closed the gap on its nearest rival in market share, Samsung .
Siemens Mobile chief Rudi Lamprecht said he aimed to keep global market share above the 10 percent he said Siemens had reached, but declined to comment on pricing pressure, which he described last month as "intense".
He did, however, say he planned to cut costs by moving half of Siemens Mobile's research and development to low-cost countries such as China and India by the middle of next year, from its current level of 18 percent.
The high-tech Medical division, the most profitable of all Siemens' units, also said it would increase the proportion of its R&D and production staff in low-cost countries to almost a third by 2005.
The unit, which makes imaging and monitoring equipment as well as medical IT systems, does a large part of its business in the United States and has been particularly hard hit by the weak dollar.
Fixed-line telecoms division ICN, which made its first profit in two-and-a-half years in the September quarter, was cautious in its outlook, reiterating only that the worst was over after a slump in investment from telecoms operators.
ICN chief Thomas Ganswindt emphasised the role innovation would play in his unit's drive for greater market share, but he said last week that falling prices would cancel out the effects of a slight upturn being seen in the market.
IT ACQUISITION HUNT
The third arm of Siemens' Information and Communications group, IT services unit SBS -- which has also been struggling with falling demand -- set its sights higher, saying it was on the lookout for an acquisition in western Europe.
SBS chief Paul Stodden said the unit, which made margins of 0.2 percent last year, could still reach its margin target of five to six percent this year if demand improved despite a weak market in its core region, Germany.
VDO Automotive, the car components unit that represents more than 10 percent of Siemens' business, said it expected to boost its operating profit margins above five percent after this month's buy of a U.S. electronic components factory from DaimlerChrysler that will extend its geographic and product range.
Power Generation, a traditional profit driver at Siemens, said it would maintain margins in a range of 10 to 13 percent although it did not see demand in the important U.S. market picking up in the next year.
But Transportation Systems said it would fail to remain in its target range of five to seven percent as it would have to make provisions described only as "less than 200 million euros" ($255 million) for claims relating to defective trams.