Stock Exchange: Nokia Siemens Networks targets improved financial performance

4. November 2009 at 05:00

Nokia Siemens Networks today announced its plan to improve financial performance and return to growth. The plan includes reorganizing the company’s business units to better align with customer needs; extensive operating expense and production overhead reduction, including a global personnel review; ongoing purchasing savings; expanded partnering to ensure a full portfolio of world-class products and services; and potential acquisitions where assets would add scale to existing product areas or customer relationships. Check out the full press release after the break…

Company sets goal to reduce annualized operating expenses and production overheads by EUR 500 million by end 2011 compared to end 2009

“As our customers make purchasing decisions, they want a partner who engages in issues well beyond a traditional discussion of technology,” said Rajeev Suri, chief executive officer of Nokia Siemens Networks. “Business models, innovation, growth and transformation are now very much front and center when it comes to the selection of a technology partner – and our planned new structure will position us well in this changing market.”

Reorganization

The Company’s five business units are planned to be realigned into three, each targeting a specific customer focus area. The planned new business units, which are expected to come into effect on January 1, 2010, are:

– Business Solutions, which will focus on helping customers generate new revenue and differentiate from the competition by providing a faster time to market for end-user services; enhancing billing and charging capability; automating and simplifying processes; addressing the challenges of convergence; and tapping into rich subscriber data to deliver a unique customer experience. Jürgen Walter, currently head of the company’s Converged Core business unit, will assume leadership of the Business Solutions organization.

– Network Systems, which will focus on providing both fixed and mobile network infrastructure, including the company’s innovative Flexi base stations, core products, optical transport systems, and broadband access equipment. Marc Rouanne, currently head of the company’s Radio Access business unit, will assume leadership of the Network Systems organization.

– Global Services, which will focus on helping customers improve operational efficiency through outsourcing of their non-core activities; supporting and managing their networks with robust customer care offerings; and ensuring fast and cost-effective implementation of new networks and network upgrades. Ashish Chowdhary, currently head of the company’s Services business, will assume leadership of the Global Services organization.

Rouanne and Walter will join the Company’s Executive Board, effective January 1, 2010. Chowdhary is already a member of the Executive Board and will remain so in his new role.

Cost reductions

Despite having fully achieved the original merger integration savings objectives of Nokia Siemens Networks, changes in the global economy and competitive environment make further cost reductions necessary. As a result, Nokia Siemens Networks will target a reduction of annualized operating expenses and production overheads of EUR 500 million by the end of 2011 compared to the end of 2009. The company estimates that total charges associated with these reductions will be in the range of EUR 550 million over the course of 2010-2011.

The operating expense and production overhead savings are expected to come from a wide range of areas, including real estate, information technology, site optimization, strategic workforce rebalancing, and overall general and administrative expenses. As part of this effort, the company will also conduct a global personnel review which may lead to headcount reductions in the range of about 7-9 percent of its current approximately 64,000 employees.

Specific country impact may be higher or lower than the now estimated global 7-9 percent range and the company will only provide further details related to this intended action when the review and planning process has progressed and employee representatives have been involved where required. As the stability of customer relationships is a key priority, disruption to key customer-facing sales positions as a result of this review is expected to be limited.

In addition to the operating expense and production overhead savings, Nokia Siemens Networks will target an annual reduction in product and service procurement costs related to cost of goods sold that is substantially larger than the targeted EUR 500 million in operating expenses and production overhead reductions. This targeted reduction is expected to position the company to meet ongoing customer requirements for competitive pricing.

Partnerships and acquisitions

Nokia Siemens Networks will seek to further strengthen its business through partnerships and acquisitions. The Company already has a range of partnerships, including with Juniper Networks in the Carrier Ethernet transport arena.

Nokia Siemens Networks will also pursue acquisitions when assets are available and the associated purchase price of those assets provides the appropriate value. In particular, the Company will target assets that enhance the scale of existing product and service business lines and that deepen relationships with key customers.

“We recognize that we are operating in a market where customer needs are evolving fast,” said Mika Vehvilainen, chief operating officer of Nokia Siemens Networks. “We see acquisitions and expanded partnering as important tools to help meet these needs in the fastest, most efficient way possible.”