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November 23, 2011

Nokia Siemens to lay off 23% of its workforce

Nokia Siemens Networks has announced today a huge restructuring plan which will cull nearly a quarter of its workforce to focus on mobile infrastructure builds

By Allan Swann

In a press conference this afternoon the company announced that it will be culling 17,000 of its 74,000 strong workforce in order to reduce costs. The company will also be restructuring to refocus on mobile network infrastructure and services markets in an attempt to become profitable.

"These planned reductions are regrettable but necessary – and it is our goal to make them in a fair and responsible way, providing the support we can to employees and communities," said Nokia Siemens networks CEO Rajeev Suri.

The troubled company aims to reduce costs by €1bn by the end of 2013, and will be looking to divest assets as well as streamline the current structure as it struggles to integrate its $1.2bn purchase of Motorola’s wireless network business.

"We believe that the future of our industry is in mobile broadband and services – and we aim to be an undisputed leader in these areas," said Mr Suri.

The recession has also seen demand drop as many companies put off, or slow down, their ‘hard’ telecommunications infrastructure builds. The mobile space however continues to grow, and tentative 4G network rollouts have begun around the world.

"Despite the need to restructure parts of our company, our commitment to research and development remains unchanged, with investment in mobile broadband expected to increase over the coming years," Suri said.

The venture has been a loser for Nokia and Siemens having posted quarterly losses for most of its history since formation in 2007. Private equity was interested in the firm earlier in the year, but no offers were finalised.

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Both Nokia and Siemens agreed on a further €1bn cash injection earlier this year, but the results haven’t been up to scratch.

Analysts are now picking that the company’s announcement is to tighten up the ship for an initial public offering before the joint venture expires in 2013.

The company, founded in 2007 as a joint venture between Siemens of Germany and Finnish Nokia, focuses on global data networking and telecommunications equipment. It has struggled against main competitors Ericsson, Huawei and Alcatel-Lucent.

Within the Mobile Carrier Network Infrastructure market, which is booming and expected to continue to grow and consumers continue to take up smartphones, it sits with 13.2% share, compared to Ericsson’s 34.1%, Huawei’s 15.6% and matches Alcatel-Lucent’s 13.2%.

CBR discusses why these cuts were necessary here.

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