Nokia Takeover of Nokia Siemens Could Mean More Job Cuts

 
 
By Jeffrey Burt  |  Posted 2013-08-08
 
 
 

Nokia's takeover of the Nokia Siemens Networks will lead to a name change for the company and reportedly more lost jobs.

Nokia officials in July announced the company was buying out Siemens' share of the embattled six-year-old wireless networking company for about $2.2 billion, a move that had been months in the making after Siemens executives began airing their desire to get out of the joint enterprise.

Now the deal has closed, and the company will be known as Nokia Solutions and Networks—keeping the NSN initials—officials with the phone maker said Aug. 7.

According to reports, the closing of the deal will also lead to another round of layoffs. Citing three unnamed sources close to the situation, Bloomberg reported that the company will cut as many as 8,500 jobs in hopes of boosting profits, reducing its overall workforce by 17 percent, to 42,000 or so, by the end of next year.

The sources also noted that no final decisions have been made.

The 8,500 job cuts would only be the latest at the company, which has struggled to remain competitive since the two companies joined forces in 2007 to sell networking equipment to enterprises and service providers. The space has become increasingly competitive, not only from U.S.-based vendors like Cisco Systems and Hewlett-Packard, but also from other European companies like Ericsson and vendors from Asia, including Huawei Technologies.

Over the past several years, Nokia Siemens has gone through several rounds of layoffs—reducing its workforce by as much as 25 percent—as part of larger restructuring efforts aimed at making the company profitable. The company reportedly had seen a bump in fortunes in recent quarters as it has focused on 4G wireless technologies.

Earlier this year, Siemens executives were vocal about their desire to get out of the joint enterprise, fueling speculation around its future, from outside firms buying the whole company to selling Siemens' part to taking the Nokia Siemens public.

In the end, Nokia officials decided to buy out Siemens, saying they were confident in the company's direction.

"Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity," Nokia CEO Stephen Elop said in a statement at the time the smartphone maker announced it was buying Siemens' stake. "Nokia is pleased with these developments and looks forward to continue supporting these efforts to create more shareholder value for the Nokia group."

Analysts said the deal was an opportunity for Nokia to re-establish its position in the mobile market, both through its Windows-based Lumia smartphones and its growing expertise in Long Term Evolution (LTE) wireless networks.

"It's good to be focused where you're strong and to build scale around that dimension," Nokia Solutions CEO Rajeev Suri—who had held the same position with Nokia Siemens—told Bloomberg. "We're the only ones playing that game."

 

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