Nokia Siemens Reveals Product Picks

BARCELONA -- 3GSM World Congress -- Nokia Networks unveiled a new brand and a streamlined product portfolio at the 3GSM show in Barcelona today.

The joint venture's future looked uncertain at the end of last year as a corruption investigation at Siemens AG (NYSE: SI; Frankfurt: SIE) reached a climax with the arrest of five people. (See Corruption Probe Targets Siemens Staff .) Nokia Corp. (NYSE: NOK) and Siemens decided to delay the launch of the new entity from the beginning of the year to let the dust settle on the scandal. (See Nokia Siemens JV in Jeopardy.)

But CEO-designate Simon Beresford-Wylie said today that he fully expects the joint venture to close in the first quarter of this year. As for the ongoing investigation at Siemens, "both parents need to come to an understanding of the consequences."

Nokia Siemens Networks claims it will be the second largest equipment vendor after Ericsson AB (Nasdaq: ERIC), based on 2006 carrier business revenues. The new company forecasts pro-forma revenues of $22 billion for 2006. It will have 600 customers in about 150 countries. It will have 60,000 employees but will lose 6,000 to 9,000 over the next four years. (See Nokia, Siemens Create Networks Giant.) The new company also expects to achieve €1.5 billion ($2 billion) in cost savings by 2010. Forty percent of the savings will come from research and development, meaning rationalized product portfolios. The remainder will come from procurement, sales force rationalization, IT, and real estate, said Beresford-Wylie.

Nokia Siemens Networks will have six business units: Radio Access (such as GSM and WCDMA), Broadband Access (including DSLAMs and GPONs), Service Core and Applications (including media gateways and IMS), IP/Transport (including DWDM), OSS (network and element management), and Services (including hosted communications platforms).

Nokia and Siemens spent much of the last eight months, since the tie-up was announced in June, evaluating product portfolios and deciding which ones to keep. The company, for the most part, is keeping the products that serve the largest number of customers, and in some cases, such as the radio access network technologies GSM and WCDMA, it will retain both companies' products.

"Both companies have a substantial footprint, so the economics of maintaining a dual portfolio are reasonably good," says Heavy Reading analyst Patrick Donegan. [Ed. note: Full disclosure -- This article's author is married to Heavy Reading analyst Patrick Donegan. But she respects his opinion nonetheless.]

For mobile core network equipment, Donegan says the new joint venture has been more "selective and brutal." For IMS, Nokia Siemens Networks prefers the Siemens AdvancedTCA, which is significant because Nokia has not been enthusiastic about ATCA until now, says Donegan. And in the mobile packet core, it chose Nokia's SGSN and GGSN products.

For mobile WiMax, the joint venture will go with Nokia's platform, but for fixed WiMax, it picked the Siemens product. For long-term evolution (LTE), the new company will build a common platform and create a new product line.

Nokia Siemens Networks will migrate to a common microwave transport solution and one IP DSLAM product, while not changing any other IP/transport or broadband access product.

The following product areas will each be rationalized to just one lead product: mobile and fixed softswitches; media gateways; push-to-talk over cellular; intelligent networks; packet core; mobile TV (DVB-H) and IPTV; and converged charging.

Nokia Siemens Networks also said today that it will continue the joint venture Siemens has with NEC Corp. (Tokyo: 6701), called Mobisphere, for WCDMA. Nokia Siemens will continue to support Mobisphere's customers, and NEC may collaborate on LTE.

The new brand is meant to exemplify "understanding and uniting communities," says Christoph Caselitz, designated chief marketing officer, of Nokia Siemens Networks. "It also stands for innovation and the pioneering, passion, and pragmatism that this company will represent."

— Michelle Donegan, European Editor, Light Reading

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