Nokia Siemens to Shrink Workforce by 9,000

Following in the footsteps of fellow telecom equipment maker Alcatel-Lucent, Nokia Siemens Networks will advance plans to reduce its 60,000-person workforce by 15 percent -- 9,000 people -- in the next two-and-a-half years, the company said Friday.

The cuts are part of a larger plan to become more competitive in a vastly changed telecom landscape, stated the Finland-based firm -- a joint venture between Nokia and Siemens that serves the telecommunications industry and formally began operating as a standalone unit just last month.

"This is a necessary step to build a Nokia Siemens Networks able to compete now and in the future," said CEO Simon Beresford-Wylie. "I know that the planned actions announced today will be difficult for some, but it is our responsibility to create a winning company that can provide strong future opportunities for employees, adequate returns for our shareholders, and cost-competitive products, services and solutions for our customers."

The cuts will be worldwide, but are likely to be felt the most in Finland and Germany, where most of the venture's workers are located. Nokia is based in Finland; Siemens is a German company.

Despite initial cuts of more than 4,000 workers between the two countries, the company was not seeking to shift significant numbers of jobs to lower-cost regions, it stated. "Finland and Germany will continue to be our major centers of employment," Beresford-Wylie added.

The moves emphasize the changes that have come to the telecom landscape in the past few years, when major carriers worldwide have merged into a relatively smaller number of customers for gear makers such as Nokia Siemens, Alcatel, Nortel and others.

Change or Die

Those mergers have, in many cases, reduced the need for telecom network gear and, at the very least, made it critical that companies win contracts from the few remaining carriers.

The phone equipment sector has responded with mergers of its own, such as the controversial pairing of France's Alcatel with U.S.-based Lucent.

Nokia Siemens said it believes it can save more than US$2 billion annually by 2010 with the job cuts and others changes.

When they announced plans to form their joint venture last summer, Nokia, the No. 1 mobile handset maker, and tech and industrial conglomerate Siemens, said they were seeking to shorten the time it takes to deploy gear for carriers, and to help absorb the high costs of research and development of next-generation technologies.

Speed Needed

Combined, Nokia Siemens represents the third largest maker of telecommunications network equipment, behind Alcatel and Ericsson (Nasdaq: ERICY), though it claims it is the second-largest provider of wireless networking infrastructure.

The approach taken makes sense because it enables Nokia to focus more attention on handsets while keeping in play the possibility of synergies between the equipment and handset businesses, Current Analysis analyst Avi Greengart told the E-Commerce Times.

Still, some possible hurdles remains, including the need for the two companies to set aside traditionally aggressive pursuits of the same customers, he said. Additional delays will benefit Alcatel, which focuses on many of the same markets, Greengart noted. The merged operation began three months later than originally hoped -- the companies had targeted a Jan. 1, 2007 start date.

"Having competed fiercely in the past, employees from Nokia and Siemens will have strong, sometimes differing opinions on appropriate market and product strategies," he said.