Analysts: NSN Focus Makes Sense
On Wednesday the joint venture firm announced a restructuring program that will result in a headcount reduction of 17,000 (about 23 percent of the total workforce) and a focus on very particular parts of the vendor's business. The net result will be a smaller company with lower costs, greater focus and far fewer product lines. (See NSN Unveils Its Kill List , NSN to Cut 17,000 Staff, NSN to Restructure and NSN's New Tradition.)
And there seems little doubt that NSN has chosen the strongest parts of its business to maintain: Its mobile broadband portfolio is well regarded, as is its CEM strategy, while it is among the leading players in the global telecom professional services sector (including managed services), where it is second only (in many people's eyes) to Ericsson AB (Nasdaq: ERIC). 213735
The principal focus of the new NSN on mobile broadband is one that makes sense, says Heavy Reading senior analyst Gabriel Brown. "In mobile broadband NSN has well regarded products, it is technically strong, and has good market share," he states. (See NSN Adds to Liquid Radio, Indosat, NSN Trial 1800 MHz LTE and NSN Adds LTE-Advanced to RAN.)
"There is not too much surprise that non-mobile assets are being cut away," Brown continues. "The company has been heading in this direction for some years and appears comfortable acting as a channel and integrator for wireline OEMs. On balance, operators would prefer to see a focused, sustainable mobile broadband business, than a loss-making integrated vendor," adds the analyst.
However, "overall there is still too much corporate uncertainty around NSN. Plans for its long-term ownership structure, its geographic focus, and the timeline for this restructuring must be communicated to the market more quickly and with more certainty," Brown concludes.
Concerns over the uncertain outcome of NSN's extensive restructuring program are also highlighted by Heavy Reading's chief analyst Graham Finnie. He says the new focus "seems like a sensible move but it will likely spook a lot of customers, as that's a lot of staff to get rid of. Some customers will be concerned about whether they can be properly supported."
And with so many staff leaving there are other manpower concerns too, says Finnie. "NSN needs to keep developing and the question is, will it still have the resources it needs to do that properly? Getting rid of 17,000 staff will lead to a lot of questions," says the analyst.
Finnie also notes that NSN's main competitors will smell blood and seek to capitalize on the joint venture's vulnerability. "Rivals will exploit this situation ruthlessly, no doubt," he adds.
— Ray Le Maistre, International Managing Editor, Light Reading