NSN CEO: Parent companies will not contribute more cash to JV
Nokia Siemens CEO Rajeev Suri said in a letter to staff that parent companies Nokia (NYSE:NOK) and Siemens will not contribute more cash to the infrastructure vendor following its announcement last week that it will shed up to 17,000 workers.
Suri said the parent companies have contributed money "for the last time," according to the letter, which was obtained by Reuters and the German magazine Spiegel. Nokia Siemens spokesman Ben Roome confirmed the details of the letter.
"Our profitability remains far too low, with huge net losses since the start of the company. We continue to burn cash and have consistently generated negative free cash flow," Suri wrote in the letter. "We have too many businesses that have never produced adequate returns and regions that continually deliver losses."
Nokia Siemens said last week that it plans to focus exclusively on the mobile broadband market, and said it will shed or shutter unrelated businesses, a move that analysts praised. NSN said it plans to cut 17,000 workers by 2013, for a total cost savings of around €1 billion, or $1.34 billion. The Wall Street Journal pointed out that the company's new cost-savings target is double its previous forecast, before the cuts. The removal of 17,000 positions will reduce NSN's total workforce by 23 percent.
Nokia and Siemens each contributed €500 million to NSN in September, and some analysts speculated that following the announced job cuts more funding might be coming to cover the restructuring costs. NSN has struggled to maintain profitability in the network infrastructure market in recent years, squeezed at the high end by successful giants like Ericsson (NASDAQ:ERIC) and on the low end by low-cost Chinese suppliers like Huawei and ZTE.
In the letter Suri said NSN will likely cut or put on "maintenance mode" businesses including fixed-line VoIP, broadband access, WiMAX, narrowband, carrier Ethernet, business support systems and communications and entertainment solutions. However, Suri said Japan, Korea and the United States will be the three top countries for NSN where it "absolutely must succeed."
- see this Reuters article
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