The news: Nokia Siemens Networks (NSN) entered the year in a confident manner with its CEO Rajeev Suri claiming: "My assessment is that the market in the long term only has room for three large international equipment manufacturers."
He did not, however, give an indication to the likely players that might form this elite group.
Undaunted, Suri pronounced at Mobile World Congress in Barcelona that independent testing of its LTE equipment installed in Sweden provided consistently faster speeds than LTE equipment from rival Ericsson. When questioned as to the reason NSN's network provided faster speeds, Suri contended that "it's just better technology."
To boost the scale of the company, NSN pushed ahead with the $975 million purchase of Motorola Solutions. As a result its head count rose to more than 70,000.
By mid-year, analysts were pointing to NSN's disappointing employee productivity levels compared to its rivals, resulting in calls for cuts in headcount. Less than two weeks later the company announced that 1,500 jobs would be cut in its WiMAX and GSM divisions.
By September, Nokia and Siemens--after abandoned ideas to float NSN and failing to attract offers from private equity firms--decided to inject another €500 million each and indicated that an IPO was under consideration for the future. The following months saw the company gradually reduce its headcount, until in November it announced it would slash 23 per cent of its workers--up to 17,000 in total--with the stated objective of cutting operating expenses and production costs of €1 billion by 2013.
Suri maintained that the cuts were necessary to stay competitive and improve profitability, and that NSN would dispose of numerous business units and focus on mobile broadband.
Alcatel-Lucent also had a challenging year--albeit that it kept a lower profile. In November CEO Ben Verwaayen cut the company's full-year earnings guidance, and announced cuts to save around €500 million next year.
On the positive, Alcatel-Lucent recorded strong sales in the United States and had its patent portfolio estimated as being worth around $9 billion. However, the company, which was valued at $100 billion at its peak, is now valued at $7.8 billion, having made continuing losses since Alcatel acquired Lucent in 2006.
Riding serenely above this mayhem, Ericsson continued to retain its No. 1 position in the worldwide infrastructure market but adjusted its structure more toward operational and business support systems with the $1.5 billion purchase of Telcordia. Ericsson also sold off its 50 per cent holding in the Sony Ericsson handset JV to its Japanese partner for around $1.47 billion. However, this move triggered speculation that Ericsson would now look to rid itself of the troubled semiconductor JV, ST-Ericsson, that it established with STMicroelectronics in 2009.
Why it was significant: Despite the continued upsurge in mobile data and European operators deciding their LTE deployment plans, 2011 was a difficult, if not traumatic, year for some equipment vendors. Overshadowing for fortunes of NSN, Alcatel-Lucent and Ericsson are two issues that magnify the problems encountered in 2011, and hasten the need to refocus in 2012. The Chinese vendors Huawei and ZTE are increasing their efforts to become leading equipment suppliers--if not on price, then on technical superiority. Secondly, the larger European operators are pushing ahead with procurement joint ventures and cross-border network sharing agreements with the hope that they can cut their capital expenditure budgets. More intense competition and buyers that want to cut costs will make for a potent brew in 2012.