LONDON (Dow Jones) - German industrial conglomerate Siemens AG rounded off a dismal fiscal year by producing an 88% decline in fiscal fourth-quarter profit on Thursday, hurt by the costs of selling its handset-making division as well as widening losses at its IT business.

Siemens AG (SI) said net income fell to 77 million euros in the quarter. The mobile phone-making division, sold off to Taiwan's BenQ, used 1.2 billion euros of Siemens' cash in the fiscal year, and also said it'll have to spend another 500 million euros next year.

"It seems that the total cash cost of exiting handsets therefore is 1.7 billion euros, which is much higher than initially indicated," said Merrill Lynch analyst Bram Cornelisse.

The company's IT unit, Siemens Business Services, had its loss widen to 427 million euros from 28 million euros on charges related to its restructuring. Siemens recently announced it was cutting 2,400 jobs in that unit.

J.P. Morgan analysts said that after stripping out charges for SBS and the larger than forecast losses from the handset division, Siemens' profit came in better than expected.

Sales for the conglomerate rose 13% to 22.1 billion euros, or 4% on a comparable basis, helped by growth from divisions related to the power business.

It raised its dividend to 1.35 euros from 1.25 euros a share. Siemens didn't mention a share buyback plan, though it held to fiscal 2007 guidance.

Siemens rose 1.3% to 62.81 euros a share in Frankfurt, but had fallen 0.6% in 2005. The broader German DAX 30 has climbed 18% during that time span.

J.P. Morgan told clients the company's shares could rise to 70 euros by December 2006 .

"We believe that the discussion on the stock's valuation is focused on the expectations relative to the groups 2007 margin targets and the potential to create earnings growth either through buy-backs or acquisitions," it said.

(END) Dow Jones Newswires

11-10-05 0548ET Copyright (c) 2005 Dow Jones & Company, Inc. Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.