Analysts: NSN must improve productivity, cut headcount

Nokia Siemens Networks (NSN) is running into fresh criticism from the analyst community over its disappointing employee productivity levels compared to its rivals. This comes after its joint owners, Nokia and Siemens, failed last week to find a private equity partner to purchase a stake in the company.

Comparing NSN's productivity with the industry leader Ericsson, Bloomberg reported that NNSN generated sales of around $250,000 per employee last year, 19 per cent less than Ericsson.

"They haven't fired enough," says James Crawshaw, a London-based equity analyst at Standard & Poor's told Bloomberg. "Siemens historically over-engineered their products and in certain industry verticals people will pay for that, but the telecom sector isn't prepared to pay that premium for German engineering when Chinese engineering gets the job done."

Of note, NSN has also increased its headcount from about 60,000 when it was formed in April 2007 to over 73,000 due to additions from outsourcing and the acquisition of the Motorola unit. Its German operation has almost 10,000 employees.

JPMorgan Cazenove analyst, Sandeep Deshpande, issued a note last week suggesting that NSN could report second-quarter earnings before EBIT of over €82 million on revenue of €3.3 billion.

But even this optimistic forecast failed to convince Bengt Nordstroem, the head of Stockholm-based telecoms consultancy Northstream. "I don't think it's an IPO-ready company," he told Bloomberg. "There is strong growth in mobile broadband, but also tough competition so prices are still very low."

Placing more pressure on the joint venture, a poll last week of 36 analysts conducted by Reuters suggests that Nokia will report a second-quarter loss as its handset business continues to lose market share. Only four of the analysts questioned were positive about the future prospects for the company.

For more:
- see this Bloomberg article
- see this YLE article

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