Nokia Siemens slashes 23% of workforce in effort to save €1B

Nokia Siemens Networks (NSN) will cut 17,000 jobs by the end of 2013. This action by loss-making NSN is an attempt to reduce annual operating expenses and production costs of €1 billion by 2013.

This move, which comes soon after the appointment of Jesper Ovesen as executive chairman, will see NSN restructure into a simpler organisation with fewer sites. The integration of Motorola Solutions will result in heavy cuts to the workforce.

"We need to take the necessary steps to maintain long-term competitiveness and improve profitability in a challenging telecommunications market," said CEO Rajeev Suri, according to Bloomberg. "Our commitment to R&D remains unchanged, with investment in mobile broadband expected to increase in coming years."

NSN parent companies Nokia and Siemens recently pumped €500 million each into the JV. According to NSN, after the overhaul the company will focus on making mobile broadband equipment and offering services to operators. It plans to dispose of several smaller businesses which are more related to its fixed-line operations.

While CEO Suri admitted to the Financial Times that the staff cuts were "regrettable but necessary", he said that the company needed to take the required steps to maintain long-term competitiveness and improve profitability in a difficult telecoms market.

"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," Suri said.

Mark Newman, chief research officer at London-based Informa Telecoms & Media, told Bloomberg that it was clear Ericsson and Huawei are quite a long way ahead of the competition. "NSN has struggled to remain competitive. It's gone through periods of being extremely aggressive in terms of pitching for new business because it realised it needed to win new contracts."

Looking forward, Swedbank analyst Jari Honko told Reuters: "This is a big move. I believe the goal is an IPO. That cannot be done with the current structure and operation models."

For more:
- see this Bloomberg article
- see this second Bloomberg article
- see this Financial Times article
- see this Reuters article

Related Articles:
Ericsson grows market dominance, but warns of Q4 troubles 
Analysts question Ericsson's commitment to ST-Ericsson
Ericsson posts Q3 profit, but N. American sales continue to decline 
Nokia, Siemens inject €1B into NSN, mull IPO possibility
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