via reuters.com
Wednesday, November 23, 2011
Nokia Siemens to Cut 17,000 Jobs
By CHRISTOPHER LAWTON And ARILD MOEN
HELSINKI—Network-equipment vendor Nokia Siemens Networks said it would cut nearly a quarter of its staff and restructure its business in a last-ditch effort to reach profitability and position itself for independence.
Rajeev Suri, chief executive of the joint venture owned by Nokia Corp. and Siemens AG, said the company would cut 17,000 jobs globally, or 23% of its work force of 74,000, to save €1 billion ($1.35 billion) in annual costs by 2013—double its current target. Mr. Suri also pledged to double down on its mobile broadband businesses, promising to divest other noncore businesses or manage them for value.
"While we plan to reduce our work force significantly, we will not make simple across-the-board reductions. We will focus on doing what we do best," Mr. Suri said in a conference call Wednesday. He declined to specify which regions would be affected.
Up until earlier this year, Nokia and Siemens had hoped they could unload a controlling stake in the unprofitable venture onto a consortium that included private-equity firms Gores Group LLC and Platinum Equity LLC, but the talks fell through. Previous talks with private-equity firms Kohlberg Kravis Roberts & Co. and TPG Capital also fell through.
Instead, in September, Nokia and Siemens injected €1 billion into the struggling joint venture, which recorded a €114 million operating loss in the three months to Sept. 30 despite a 16% rise in revenue to €3.41 billion. They also appointed Jesper Ovesen, the former chief financial officer of Danish operator TDC A/S, as the company's new chairman.
The level of job cuts was surprising, but necessary as Nokia Siemens works to position the venture to go public, said Swedbank analyst Jari Honko. "The present chairman of the board has a task to prepare Nokia Siemens for an initial public offering. The company can't really continue with the current setup. It's not that profitable," Mr. Honko said.
Nokia in September listed an IPO as one option for Nokia Siemens, as it works to be more of a "stand-alone" entity. In a statement, Mr. Suri on Wednesday said that as Nokia Siemens looks toward an "independent future," it needs to take action now to improve its profitability and cash generation. The joint venture is scheduled to come to an end in 2013. Of the last five consecutive quarters of revenue growth Nokia Siemens has recorded, only one was operationally profitable. The venture has been hurt by stiff competition from rivals, such as Telefon AB L.M. Ericsson, the market leader by sales in wireless gear.
Nokia and Siemens each own half of the venture, but Nokia has four of its seven board seats and consolidates the venture's results in its financial statements.
Nokia Siemens Networks Wednesday said it will focus its strategy on mobile network infrastructure and services, with a particular emphasis on mobile broadband.
The planned cost-cutting measures include site consolidation, cost synergies from the integration of Motorola's wireless assets and efficiencies in service operations, it said. Nokia Siemens acquired Motorola's wireless network equipment unit for $1.2 billion in July.
Cost cuts will largely come from shedding jobs but also from general cost cuts and selling of real estate.
via online.wsj.com
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