NSN announces 17,000 job cuts

Nsn Will Slash 17,000 Jobs From Its Global Workforce

Nokia Siemens Networks (NSN) has announced that it plans to axe 17,000 jobs – almost a quarter of its 74,000 global workforce – by the end of 2013.

The company said that the job cuts are part of a move to target end-to-end mobile network infrastructure and services, with a particular emphasis on mobile broadband. This will likely see the firm exit the fixed landline market.

“We believe that the future of our industry is in mobile broadband and services – and we aim to be an undisputed leader in these areas,” said CEO Rajeev Suri. “At the same time, we need to take the necessary steps to maintain long term competitiveness and improve profitability in a challenging telecommunications market.”

The firm plans to reduce operating expenses and production overheads by €1bn by the end of 2013, compared with the end of 2011. These savings would come largely from streamlining its workforce, the company said, but it will also target savings in areas such as real estate, IT, product and service procurement costs and administrative expenses. It is also looking for a significant reduction of suppliers in order to further lower costs and improve quality.

NSN also plans to scrap its matrix organisational structure in favour of a simpler structure. It will consolidate some of its physical sites, transfer activities to global delivery centres, consolidate certain central functions and derive cost synergies from the integration of Motorola’s wireless assets, as well. However, NSN’s investment in mobile broadband research and development will increase over the coming years.

The firm will begin engaging with employee representatives in each country it operates in to find the most suitable way to cut its workforce. It also intends to launch locally led programs at the most affected sites to provide re-training and re-employment support for the employees it will let go.

“These planned reductions are regrettable but necessary – and it is our goal to make them in a fair and responsible way, providing the support we can to employees and communities,” said Suri.

According to Bengt Nordström, CEO at management consultancy Northstream, NSN’s restructure is indicative of a tough vendor climate, in which Chinese firms have caused a lot of price erosion over the years.

“It’s a good indicator of the status of the infrastructure vendor community today – there is very tough competition since ZTE and Huawei entered the market around 10 years ago,” he said.

“NSN has cut its prices several times, but the competition has been so tough that even this hasn’t been sufficient. The only one that has come out of this relatively strong so far has been Ericsson because it is the only one out of the mobile infrastructure vendors that has a truly global presence.”

He added that the restructuring of the firm and axing of jobs will be a huge undertaking for NSN, and what will be imperative to the firm is its ability to “sell” the restructuring to the operator community

“NSN is one of the largest vendors so it has some very big operators as customers. These operators now need to be convinced that while NSN  is laying off 17,000 people, closing sites, concentrating on streamlining its IT and so on, it can still deliver the products and services that they need,” said Nordström.

“For many operators, they are at a critical stage in building infrastructure and need to believe that they have the right partner. A lot of NSN’s success depends on how it can convince them that in spite of everything, it will remain a strong company while carrying out the restructuring.”

He added that this should also provide warning signs on how the vendor community is evolving.

“This should raise some question marks among operators, because if this is what is happening to the big players, what state is the vendor market in?”

“Are we heading into a position where there will be very few players and maybe a not so healthy market ahead of us in terms of a competition?”