STOCKHOLM — Struggling network infrastructure vendor Nokia Siemens Networks is planning to cut 17,000 jobs worldwide, as it aims to cut €1 billion (US$1.35 billion) from its costs by the end of 2013, the company said Wednesday.
About 23 per cent of the company’s 74,000 employees will be laid off. The four and a half year-old joint venture between Nokia and Siemens AG has been struggling to compete with Sweden’s LM Ericsson and China’s Huawei Technologies Co. Parent company Nokia’s ongoing problems have made Nokia Siemens’ situation even more difficult.
Going forward, the company will focus on mobile broadband and related services. Other areas like its wireline business will be sold or “managed for value,” according to Nokia Siemens.
NSN has about 125 sales and technical support staff in Canada. A spokesman for Joy Rychlik, the director of NSN here, said the company isn’t breaking down the layoffs by country yet.
Besides savings from staff cuts, NSN will also target areas such as real estate, information technology, product and service procurement costs, overall general and administrative expenses, and aim for a significant reduction of suppliers in order to further lower costs and improve quality, the company said.
Nokia Siemens will now begin talks with employee representatives in accordance with country-specific legal requirements.
“We believe that the future of our industry is in mobile broadband and services – and we aim to be an undisputed leader in these areas,” Rajeev Suri, NSN’s chief executive officer, said in a news release. “At the same time, we need to take the necessary steps to maintain long term competitiveness and improve profitability in a challenging telecommunications market.”
In September, Nokia and Siemens together poured in 1 billion euros into the joint venture after fruitlessly looking for an investor. At the same time they appointed Jesper Ovesen as executive chairman of the board. He had been chief financial officer at Danish telecommunications group TDC during the company’s restructuring process and initial public offering.
In April it bought the carrier wireless division of Motorola Solutions Inc. for US$975 million, adding 6,900 employees. Three months later it said it would let 1,500 of them go because of lower demand for Motorola’s GSM and WiMAX equipment.
Canadian wireless carriers who buy equipment from NSN include BCE Inc.’s Bell Canada, Telus Communications, Videotron and Wind Mobile.
NSN doesn’t just make equipment for carriers. Like its competitors, it has also branched out into running carrier networks. In May it opened a network operations centre in Sao Paulo, Brazil, from where it can service carriers in North and South America. NII Holdings Inc., which has wireless operations under the Nextel brand in five South American countries, is the NOC’s first customer.
NSN also has two multi-vendor network operations centres in India and one in Portugal which are used for customer project management.
Today’s announcement was not a surprise to Mark Newman, chief research officer at market research company Informa Telecoms & Media. Earlier this year, the two parent companies gave up on finding an external investor, and injected €1 billion into the company, he said.
“We knew Nokia Siemens needed to make some decisions because sooner or later the cash injection is going to run out,” said Newman.
Since its inception, Nokia Siemens has gone through different cycles. Between two and four years ago, the company was struggling to compete on price with Huawei and Ericsson, and became very aggressive on pricing with some success in winning new business, according to Newman.
“But the question was if that was a profitable business or not. Today, the company is still aggressive, but not to the extent it was a year ago,” said Newman.
Nokia Siemens has said a vendor has to be first or second in a market to be successful.
“It is setting themselves a pretty tough challenge, because Huawei and Ericsson are the most successful vendors in the wireless infrastructure business. It is difficult to see who Nokia Siemens is going to dislodge,” said Newman.
“What we are seeing now is a genuine attempt to turn it into a single company with no overlapping functions,” said Newman, who also hopes Nokia Siemens has a clear idea of where it is going to make cuts, so it doesn’t turn into a drawn-out process that drags the company down.
(With additional files from Howard Solomon, Network World Canada)