Nokia Siemens to cut 17,000 jobs as focus shifts to mobile broadband
NSN said its future is in delivering mobile broadband, and it is restructuring the company to provideend-to-end mobile network infrastructure and services. It plans to bulk up on services and divest or manage for value business areas that are not consistent with the new strategy. Its unclear where all the job reductions will take place. But CEORajeev Suri said the cuts were necessary to maintain competitiveness and improve profitability. Said Suri:
Our goal is to provide the worlds most efficient mobile networks, the intelligence to maximize the value of those networks, and the services capability to make it all work seamlessly. Despite the need to restructure parts of our company, our commitment to research and development remains unchanged, with investment in mobile broadband expected to increase over the coming years.As we look towards the prospect of an independent future, we need to take action now to improve our profitability and cash generation. These planned reductions are regrettable but necessary and it is our goal to make them in a fair and responsible way, providing the support we can to employees and communi! ties.
As part of its restructuring, NSNwill eliminate its matrix organizational structure and will streamline its overall business, consolidating operations and functions to fewer sites and finding efficiencies and cost synergies, including from the further integration of Motorolas wireless assets.
The parent companies of NSN tried earlier this year to find a private equity buyer for the joint venture, but no takers emerged. The companies instead chose to inject another $1 billion into the company in September. Nokia Siemens has faced mounting competition from Huawei as well as from its traditional rivals Ericsson and Alcatel-Lucent, consolidation in the sector, and the rise of a monolithic wireless standard (LTE), which has made it hard for the equipment market to support a multitude of vendors. Alcatel-Lucent has struggled, whileNortel went bankruptand Motorola sold off elements of its wireless gear business to NSN.
Though NSN may be making all the right noises about mobile broadband, its struggled in that market as well. While NSN has some important international LTE contracts, most notably with NTT Docomo, the U.S. has taken the lead in the deployment of LTE and mobile broadband a role usually reserved for Europe and Asia due in large part to the iPhone and Android devices. NSN, however, is relatively weak in North America, and it saw every single one of the blockbuster network contracts go to! Ericsso n, Alcatel-Lucent and even new entrant Samsung. NSN sought to buy market share by bidding on Nortels sizable networks business, but it was outbid by Ericsson. Motorola was its consolation prize, giving it a much bigger presence in the Americas and Japan but still not quite the breadth and scale of Ericsson or Huawei.
In the third quarter NSN posted revenues of $4.7 billion, up 16 percent, while managing to cut its operating loss to $157 million. The improved performance was due in part to sales of former Motorola products and services. The company also received anew executive chairman, Jesper Ovesen, theformer CFO of TDC A/S. But overall, it has been an unprofitable venture, and NSN lost close to $1 billion last year. The new moves should help, but the fact remains that competition is fierce and NSN is still struggling to keep up.
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