Nokia Siemens Networks, the world's second-largest maker of mobile phone network equipment, is axing 17,000 jobs, nearly a quarter of its workforce, to help save about 1 billion euros ($1.35 billion) a year. NSN, which has struggled to make a profit since being set up in 2007, did not say where it would make the cuts, part of wider changes that analysts said looked aimed at gearing up the company for an initial public offering.
Cutting down on staff..
NSN was formed by Finnish group, Nokia and German congolmerate Siemens in the hope of building enough scale to lead an industry dominated by Swedish company Ericsson and, increasingly, by Chinese entrants. It has faced aggressive pricing from rivals and an economic downturn that has forced telecoms companies to cut spending. The job cuts form part of plans for the company to focus on mobile networks and move out of fixed-line infrastructure. “This is a big move. I believe the goal is an IPO,” said Swedbank analyst Jari Honko. “That cannot be done with the current structure and operation models.” Nordea analyst Sami Sarkamies said the savings from “drastic restructuring measures” would boost Nokia's annual earnings per share by up to 0.10 euro.
NSN raised 1 billion euros in late September from its parents to strengthen its balance sheet. Chief Executive Rajeev Suri said the venture would not need any further financing at this stage. “As we look towards the prospect of an independent future, we need to take action now to improve our profitability and cash generation,” Suri said in a statement. He said the company would focus on where it has scale adding: “We are a strong Number 2 in mobile broadband.” Shares in Nokia were 1.9 percent weaker, while Siemens was down 0.8 percent by 1600 GMT. Siemens and Nokia have both said they want to make the venture more independent and see a listing as one of the options within a few years.
In July, they abandoned plans to cut their stakes in the venture after private equity firms failed to meet their asking prices. Siemens has been looking for an exit since Peter Loescher took over as group chief executive shortly after operations between the two started. In the third quarter, the venture made an underlying operating profit of 6.0 million euros on sales of 3.41 billion compared with a loss of 116 million euros in the same quarter a year earlier. NSN employs about 74,000 people globally, with around 7,000 of those in Finland. Finnish economy minister Jyri Hakamies told Reuters: “It is clear that it is very severe news from a Finnish jobs perspective. The changes for both (Nokia and NSN) are massive and they raise a lot of concern.“
Nokia itself has cut more then 10,000 jobs this year, including site closures in many countries. The scale of the cuts stunned labour unions in the home countries of both parents. “These numbers are shocking,” said Antti Rinne, leader of Finnish labour union Pro. German union IG Metall called employees to arms. “The latest plans are a declaration of fight against the employees,” said IG Metall official Michael Leppek.