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Nov. 5, 2009

Late yesterday, Nokia Siemens Networks (NSN) said it is planning an important company reorganization of its business units in an effort to return the struggling infrastructure company to growth and profitability.

NSN also added that there will be layoffs in the coming weeks.

The wireless equipment manufacturer said the cost cutting measures were in response to changes in the global economy and an increasingly competitive environment.

Nokia Siemens said it will cut between 7 percent and 9 percent of its current workforce as part of a plan to save over $730 million from its operating expenses by the end of 2011.

NSN currently employs close to 64,120 employees. In addition to the cost-cutting measures, its 5 business units will be realigned into three: Business Solutions, Network Systems and Global Services. A spokeswoman for Nokia Siemens could not provide details on how yesterday's announcement affects the North America region.

The news comes only weeks after the company reported a twenty-one percent drop in sales, which fell to $4 billion from $5.13 billion in 2008. Nokia Siemens also said its market share would drop by more than previously expected this year, but didn't specify how much the decline could be.

Rajeev Suri, Nokia Siemens Networks' CEO said "as our customers make buying decisions, they want a strong infrastructure partner that engages in issues well beyond a traditional discussion of technology."

He added "business models, innovation, growth and transformation are now very much front and center when it comes to the selection of a technology partner, and our proposed new company structure will position us well in this changing market."

Globally, the wireless infrastructure market has been hit hard by the worldwide economic recession as mobile service operators have drastically reduced spending on legacy wireless networks and put off new technology deployments on next-generation infrastructure.

In other signs that the wireless industry is rapidly changing and is becoming increasingly competitive, earlier this year, Canadian infrastructure company Nortel Networks declared bankruptcy, after struggling for more than seven long years.

Since 2005, Nortel was also the subject of many accounting irregularities that kept the company's focus away from its core activities, further worsening its business.

It will be revealing to see how the other major market players are performing over the next six to twelve months, and how layoffs, corporate downsizing and other cuts will help them better navigate these turbulent times.

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Source: Nokia Siemens Networks.