As expected, Nokia Siemens Networks announced sweeping job cuts aimed at reducing its expenses and slimming its operations. Analysts had predicted the move, based on NSN's struggles in the market. The company also announced it plans to focus exclusively on the mobile broadband market, and said it will shed or shutter unrelated businesses.
The news comes months after NSN owners Nokia (NYSE:NOK) and Siemens failed to offload their struggling joint venture onto private equity. As a result, the two companies in September each injected €500 million into the business to propel it forward as a stand-alone player.
NSN has foundered 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.
NSN said it plans to cut 17,000 workers by 2013, for a total cost savings of around €1 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. The company said the action will include the "elimination of the company's matrix organizational structure, site consolidation, transfer of activities to global delivery centers, consolidation of certain central functions, cost synergies from the integration of Motorola's wireless assets, efficiencies in service operations, and company-wide process simplification."
NSN closed on its $975 million acquisition of Motorola's networking business in August.
That NSN plans to focus solely on the market for mobile broadband network equipment comes as little surprise. As the network infrastructure market overall has slowed, the last remaining bright spot in sales is in wireless. According to research firm Dell'Oro, overall revenues from the sale of mobile radio access networks in the third quarter jumped 20 percent compared with RAN revenues from the year-ago period. The research firm said the increase was driven in large part by sales of LTE and WCDMA equipment, which comprised around one-half and one-third, respectively, of the total market's gain.
"We believe that the future of our industry is in mobile broadband and services," said Rajeev Suri, NSN's CEO. "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."
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