NSN Could Lose More Than 17,000 Staff
The company said Wednesday it will restructure to focus on mobile broadband, customer experience management (CEM) and professional services, while many of its current business lines will either be "managed for value" (put into maintenance mode) or sold. (See Analysts: NSN Focus Makes Sense and NSN Unveils Its Kill List .)
As part of that process, 17,000 of NSN's current workforce of 74,000 (about 23 percent of the total) will be laid off, though the company is still not providing any details about which parts of the business and geographies will be hit hardest by those cuts. (See NSN to Cut 17,000 Staff and NSN to Restructure.)
But that 17,000 figure does not include any staff offloaded with any asset sales. This means that if NSN manages to sell any of the business lines deemed no longer strategic -- and these include WiMax, BSS (business support systems such as pre-paid billing), IPTV, Carrier Ethernet, fixed-line VoIP and so on -- then any staff transferred with divested business lines would be in addition to the 17,000 target.
Quite how many extra staff could disappear from NSN's payroll is hard to tell. The company has based the 17,000 job cuts on the number of positions it needs to cut in order to reduce its annual costs by €1 billion (US$1.3 billion) by the end of 2013 compared with 2011. It will try to sell the business lines it no longer wants to cut costs further but knows that divestments will be tough to broker in the current climate.
For example, NSN recently agreed the sale of its microwave backhaul business line to Dragonwave in a complex deal valued at just €30 million ($41.5 million) initially, though that value may increase over time. As part of that deal, due to close early next year, 360 staff are due to transfer from NSN to the Canadian backhaul specialist. (See DragonWave to Buy NSN Unit.)
State of independence
NSN is adamant, though, that the current restructuring process is not designed to make the vendor a more attractive acquisition target. "This is all about aiming to become an independent company," states spokesman Ben Roome, who noted that neither NSN nor its parent companies have ever mentioned an IPO. (See Is an IPO Next for NSN?)
And what about the timing of the restructuring? Is this a new strategy drawn up and pushed through by the new executive chairman Jesper Ovesen, who joined in September when the vendor's parents, Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE), injected €1 billion ($1.32 billion) of fresh funds into their joint venture? (See NSN Gets $1.36B & New Leader.)
The company is saying that "the plans have the full support of all the members of our board of directors, including our chairman." It is believed, though, that NSN's management has been considering ways to slim down the vendor for quite some time and that the restructuring program announced this week is not a hastily-devised plan.
The ultimate aim is for NSN to be a smaller but profitable company that's a leader in the global market for mobile broadband networks and associated professional services, a market valued by NSN at €70 billion ($93 billion) in 2011 and in which it believes it is the current second player behind Ericsson AB (Nasdaq: ERIC).
In 2010, NSN reported full-year revenues of €12.66 billion ($16.8 billion) and a small adjusted operating profit (excluding restructuring and other one-time costs). (See Signs of Growth at NSN.)
During the first three quarters of 2011 the company has generated revenues of €10.23 billion ($13.59 billion), boosted by the addition of Motorola's wireless infrastructure business, and has reported a small adjusted operating profit (excluding costs) in each quarter. (See M&A Props Up NSN's Q3 Growth, Moto Assets Help NSN's Q2 Growth and NSN Finally Seals $975M Moto Deal.)
For the fourth quarter of 2011, NSN expects to report revenues between €3.7 billion and €4 billion ($4.9 billion and $5.3 billion).
— Ray Le Maistre, International Managing Editor, Light Reading