NSN staggers into 'last chance saloon'

The drastic surgery about to take place across the Nokia Siemens Networks (NSN) business empire is being judged by industry observers as too little, too late. By only cutting around 10 per cent of its 64,000 workforce, the company is gambling that the infrastructure market will experience an upturn over the next 18 months enabling NSN to return to profitability, albeit small scale, sometime in 2011.

The cuts are the latest blow for the joint venture, which started operations in April 2007 by unveiling a €2 billion cost-saving programme including the loss of some 9,000 jobs. This time NSN has said that the cost saving could be around €500 million, or more, by substantially lowering procurement costs and reducing headcount.

However, according to CCS Insight analyst Paolo Pescatore, the recent consolidation among operators and moves towards network-sharing agreements will place greater pressure on equipment manufacturers, such as NSN, to secure new business. "'We are bound to see further casualties in the network infrastructure space as operators rethink their business models and reconsider additional network investments," he said.

NSN has also announced plans to reduce from five to three the number of business units, and looks to establish more partnerships and acquisitions to boost growth. The software developer Bridgewater Systems is being rumoured as a potential target.

Copying Ericsson's spotlight on services, NSN's new CEO, Rajeev Suri, said the revamp was designed to focus mostly on providing more services to operators in emerging markets who were increasingly looking at outsourcing. "I think Latin America, Africa and Eastern Europe play an important role in managed services," Suri said. "So far only a few operators in these regions have started to outsource operations."

But the idea of workforce reductions has, predictably, triggered an angry response from unions in Finland and Germany, claiming that this drastic restructuring would not stimulate orders and would reduce the overall power of the company. Nokia fought protracted battles with unions over the closure last year of a handset manufacturing plant in Bochum, Germany.

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