NSN: Rivals will also have to refocus, cut back

NEW ORLEANS--Bolstered by its big LTE win with T-Mobile USA, Nokia Siemens Networks finds itself in a much healthier position in North America and ready to compete with the new reality of shrinking margins for network vendors, said executives during an intimate press briefing at the CTIA Wireless 2012 show.

On Monday, T-Mobile USA selected NSN and rival vendor Ericsson (NASDAQ:ERIC) as the primary infrastructure vendors for its forthcoming LTE network. Rick Corker, NSN president of customer operations for North America, said the new T-Mobile contract is a game-changer for the vendor. "I don't have to make the same headcount changes I was going to have to make," he commented.

Corker said winning T-Mobile's business "gives us a lot of relevance in the U.S.," something the vendor admittedly needs after missing out on earlier LTE network contracts from AT&T Mobility (NYSE:T) and Verizon Wireless (NYSE:VZ). Those two operators chose Ericsson and Alcatel-Lucent (NASDAQ:ALU) as their primary LTE vendors.

"We haven't given up on the other two elephants in the room," Corker added.

This week has been a busy one for NSN. In addition to the T-Mobile deal, the company completed the sale of its fixed line broadband access business to AdTran and amended an agreement to have DragonWave take over its microwave backhaul manufacturing business.

NSN spokesman Barry French noted network equipment vendors continue to see plummeting profit margins, which is why NSN announced in November 2011 that it was narrowing its focus to concentrate primarily on providing broadband infrastructure and related services in North America, Japan and South Korea. That narrowed focus has resulted in "tough decisions on real estate," layoffs and other restructuring decisions, French said. The company intends to slash up to 17,000 jobs by the end of 2013 to save $1.3 billion.

NSN has even nixed potentially lucrative contracts--such as a TETRA public-safety project in Norway-- that don't suit its new focus.

Other network equipment vendors, such as Ericsson and Alcatel-Lucent "haven't taken the steps they need to take to adjust their cost structures to this new reality," French said.

He acknowledged that NSN's most recent quarterly financials were poor but said the company just needs to stay on plan. In the first quarter, NSN reported net sales of $3.85 billion, down 7 percent from $4.14 billion in the year-ago period. NSN reported an operating loss of $1.3 billion in the quarter, compared with an operating loss of $185.8 million in the year-ago period, though the company noted that because it completed the acquisition of Motorola Solutions' (NYSE:MSI) networks business on April 30, 2011, its first-quarter results are not directly comparable to last year.

Since the Mobile World Congress in February, NSN has won in excess of $5 billion worth of new deals, with two of those totaling more than $1 billion. The vast majority of those wins are in our priority countries," said French, noting NSN has scored a "clean sweep of LTE deals" with the three big operators in South Korea.

Nonetheless, he admits it is "early yet" to assess NSN's success on strategic objectives, though he contends the company is making good progress.

For more:                                                                                       
- see this NSN release

Related articles:
T-Mobile picks Ericsson, NSN as its LTE vendors
DragonWave amends deal to buy Nokia Siemens' microwave unit
Nokia continues to 'pursue all options' on NSN, despite upbeat Q2 outlook
Nokia Siemens' Q1 sales drop 7%, but firm promises improvement
Report: Nokia Siemens leads LTE base station ranking
Nokia Siemens says small cells, optical are keys to U.S. expansion

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