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NSN Products Face Further Cuts

Much of the additional €500 million (US$713 million) in annual cost savings that Nokia Networks needs to find by the end of 2008 will come from a "refinement" of the equipment vendor's product lines, the CFO of Nokia Corp. (NYSE: NOK) announced today.

The new round of cost-cutting got announced today along with the Finnish giant's third-quarter earnings. The news came as NSN reported a sequential increase in revenues and a narrower operating loss during its third quarter, as its gross margins increased to 28.3 percent from the second quarter's 23.6 percent. (See NSN Improves, Confirms Extra Cuts.)

"Nokia Siemens Networks is heading in the right direction, and they know what needs to be done," said Rick Simonson, the company's CFO, during the earnings conference call.

But Simonson didn't provide any further details about product line rationalization, and NSN would say only that it is "looking to continuously improve our offering to customers. To win in a commoditizing business, one must have scale, a number one or two market position, innovation excellence, and a best-in-class cost structure. We are working towards that."

NSN said in February, when it identified its six business units, that about 40 percent of the original €1.5 billion ($2.14 billion) in merger-related cost savings would come from product line rationalization, so this new move will concentrate the vendor's technology focus even further. (See Nokia Siemens Reveals Product Picks.)

The company's ongoing "cost structure" measures don't just include reducing headcount (a process already underway in 70 countries) and cutting product lines. (See Nokia Siemens to Cut 9,000, NSN Details Job Cuts, NSN Cuts Swiss Staff, NSN Unveils German Cuts, and Nokia Siemens Details Cuts.)

During the earnings presentation, Simonson also noted that NSN has concluded negotiations with the equipment firm's 25 top suppliers, which account for 45 percent of its "direct sourcing volumes," and reduced the firm's real estate portfolio by 200 buildings.

The extra cuts being made are necessary, said Nokia's CEO Olli-Pekka Kallasvuo.

"The infrastructure market remains challenging, and NSN has more to do to make itself more competitive," Kallasvuo said. "The market dynamics of the second quarter remain true today, including low-cost competitiveness."

Those dynamics are being felt elsewhere as well. (See Profit Warning Slams Ericsson and AlcaLu Cuts 2007 Outlook by $1.25B.)

Kallasvuo did highlight some positives for NSN, though, such as its recent deals in India, China, Taiwan, and Germany, noting that the vendor had brokered 30 new deals during the third quarter. (See Nokia Siemens Lands $900M India Deal, NSN Wins Chunghwa Deal, NSN Wins in China, and NSN Maintains DT Network.)

— Ray Le Maistre, International News Editor, Light Reading

frnkblk 12/5/2012 | 3:00:29 PM
re: NSN Products Face Further Cuts Any suggest that Myrio-Siemens will be affected in any way by these job cuts?
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