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Managed Services

NSN CEO: Don't Write Our Obituary

The recently appointed CEO of Nokia Networks made a bid to calm investor fears during today's Nokia Corp. (NYSE: NOK) Capital Markets Day in Espoo, Finland, with a strong denial that his company is in a downward spiral from which it can't recover. (See Nokia Siemens Replaces Its CEO.)

"Reports of our death are not only greatly exaggerated, but they are totally false," stated Rajeev Suri, before adding, "We are winning where it matters."

For NSN, the areas that matter are mobile broadband (3G and LTE), professional services (including managed services), and "subscriber-centric solutions" that provide service providers with customer intelligence and business support system capabilities. (See Spradley: Nokia Siemens Will Be an LTE Leader, NSN Makes LTE Handover, Services Now 45% of NSN Revenues, Telefónica Kicks Off LTE Trials, and NSN Offers Solutions.)

And the CEO believes NSN has the assets, and now the strategy, to build market share in these areas and grow faster than the overall market for telecom infrastructure and related services in 2010, which NSN believes will be flat (so worth roughly the same in euros) compared with 2009.

Suri's presentation came just days after he signaled a more aggressive focus on building market share, and only hours after it emerged that NSN is still trying to buy the Carrier Ethernet and optical assets of bankrupt vendor Nortel Networks Ltd. , even though Ciena Corp. (NYSE: CIEN) recently emerged from an auction process as the victor. (See NSN Targets Greater Market Share, NSN Might Rebid for Nortel's MEN, and Ciena Beats NSN to Buy Nortel's MEN.)

What's clear is that Suri wants to put this year behind him as soon as possible. "Our sales performance has not been good enough in 2009... Our top line has dropped to levels that are unacceptable... It's been a tough year, but we have no excuses," he noted. NSN is expecting its market share to decline this year, in a market that has shrunk. (See No Sign of Recovery for Nokia Siemens, Slump Slams Nokia Siemens , and Nokia's Cellphone Hope.)

Suri's "tough," though, would be other people's disastrous: NSN saw its revenues (shored up largely by its growth in professional services) slide perilously compared with its 2008 performance, while one of its key rivals, Huawei Technologies Co. Ltd. , keeps growing -- hence the reference to the "reports of our death." (See Huawei, ZTE Buck Optical Trend, Huawei's Nordic Coup, Huawei Shaking Off Cheap Tag, Huawei's Lucky Number: 30B, and Huawei Closes In on Rivals.)

Table 1: Nokia Siemens Networks Revenues, 2008-2009
In Euros millions 2008 Revenues 2009 Revenues Year-on-year change
Q1 3,404 2,990 -12.2%
Q2 4,071 3,199 -21.4%
Q3 3,504 2,760 -21.2%
Q4 4,340 Quarter in progress --




That tough year, caused by a combination of the global economic downturn, a slowdown in carrier spending, and a conservative NSN strategy that focused on cash and profitability rather than market share, resulted in a new restructuring process that will see up to 9 percent of the vendor's 64,000 staff lose their jobs. (See Nokia Siemens Revamps, Cuts Jobs.)

The cost cutting, though, will make it easier for NSN to return to profitability, noted Suri. He said even modest growth in sales will make NSN profitable on an operating basis. And he believes there are signs in the market that growth is very possible, especially as NSN is now focused on growing its market share and recapturing some of the ground lost to the likes of Huawei, ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), and Ericsson AB (Nasdaq: ERIC).

"We are seeing some stability... It's too early to call it a recovery," but NSN is seeing a return to capex spending by carriers in Asia/Pacific, the Middle East, and Africa, and in Russia where spending had declined notably, stated Suri. (See Russia on the Rebound?)

"Driving for growth is our clear priority, and we have more flexibility than we did in 2008," because the emphasis is less on cash generation and profitability, noted the CEO.

But that doesn't herald a cavalier approach, he noted. "We won't take deals at any cost," he stressed. "Deals are returning, and we are confident we can grow."

He noted in particular that there are new professional services opportunities in markets such as Australia, Russia, and Japan. The CEO believes NSN has a strong position in that market, with 28,000 staff engaged in that sector, including 16,000 involved in managed services engagements.

— Ray Le Maistre, International News Editor, Light Reading

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