Siemens will pay $3.5 billion for software developer UGS.

The purchase of the product lifecycle management company will let Siemens offer all-digital manufacturing systems from the drawing board to the factory gate.

The move marks a change in strategic direction for Siemens, which is in the throes of a major re-organization. On 15 January, it announced plans to regroup its IT activities in a new division, Siemens IT Solutions and Services, to concentrate on outsourcing.

Over the last two years it has also moved away from the telecommunications market, selling its mobile phone handset manufacturing business to BenQ in 2005 and putting its telecommunications network equipment activities into a joint venture with Nokia last June.

Siemens plans to incorporate UGS into its Siemens Automation and Drives Group, which manufactures automation technology for factories. This will allow it to create "digital factories" for its customers, allowing them to control production quality and cost, Siemens said.

UGS reported sales of almost $1.2 billion in 2005 in a market estimated to be worth around $13 billion.