The reduction, equivalent to about 22 percent of its workforce, will be completed by the end of 2013, when Nokia Siemens aims to cut 1 billion euros ($1.3 billion) in annual operating expenses and production costs. Nokia Siemens will focus on mobile broadband and services and plans to divest or “manage for value” units that aren’t central to its focus, Espoo, Finland-based Nokia said today.
Nokia Siemens received a cash injection of 1 billion euros from its parent companies in September as Jesper Ovesen, the former chief financial officer of TDC A/S, was named to oversee the restructuring as executive chairman. The venture, set up in April 2007 to compete against Ericsson and Chinese rivals such as Huawei Technologies Co., has fallen behind and has been unprofitable in all but one quarter.
“If you look at the last two to three years, it’s become clear that Ericsson and Huawei are quite a long way ahead of the competition,” said Mark Newman, chief research officer at London-based Informa Telecoms & Media. “NSN has struggled to remain competitive. It’s gone through periods of being extremely aggressive in terms of pitching for new business because it realized it needed to win new contracts.”
Nokia rose 2.3 percent to 4.28 euros as of 2:58 p.m. in Helsinki. Siemens added 0.6 percent to 69.56 euros on the Frankfurt exchange.
Nokia Siemens employed almost 75,000 as of Sept. 30. The company generated sales of about $254,000 per employee last year, 19 percent less than Stockholm-based Ericsson, based on numbers from the companies’ financial reports. The figure for both manufacturers is sinking as selling prices for equipment such as base stations and packet-switching networks decline.
Nokia Siemens plans to simplify its organization, consolidate sites and functions, and strip out more jobs from the integration of Motorola Solutions Inc. units acquired this year, Nokia Siemens said.
Nokia Siemens hasn’t decided how many jobs will be cut per country, spokeswoman Jozefa Terloo said from Munich. Negotiations with worker representatives will start immediately, she said. In Germany, the venture has about 10,000 employees.
“We need to take the necessary steps to maintain long-term competitiveness and improve profitability in a challenging telecommunications market,” Chief Executive Officer Rajeev Suri said in a statement.
Assets that are peripheral to the new strategy include “a lot of wireline areas” as well as a unit that sells IPTV services to carriers, Suri said in an interview, adding that he doesn’t anticipate announcements on a possible share sale or change of ownership in the near future.
“We got a billion euros of equity committed by parents in September to support new strategy,” Suri said. “We have a new executive chairman that sort of paves the way for independence. Apart from that, nothing else on the horizon.”