Nokia Siemens Networks, a unit of Nokia Corp. (NOK), Tuesday revealed several plans including about 7% to 9% of workforce reduction, and realigning five of its business units into three, as a part of its plan to improve financial performance and return to growth.
While reporting its third quarter results, Finnish mobile giant Nokia cautioned that it expects Nokia Siemens Networks market share to decline by more than previously expected in 2009. The company's previous projection was for a moderate decline. Hefty impairment charge in Nokia Siemens Networks forced the company to a net loss for the third quarter.
As a result, Nokia Siemens plans to reorganize its business units to better align with customer needs. The company also plans to cut down its operating expense and production overheads to a wide range. The company further intends to expand its business through partnerships and acquisitions.
The company said it plans to scale down its five business units to three, each targeting a specific customer focus area. The planned new business units are expected to come into effect on January 1, 2010.
Business Solutions unit will focus on helping customers generate new revenue and differentiate from the competition by providing a faster time to market for end-user services. Jurgen Walter, currently head of the company's Converged Core business unit, will assume leadership of the Business Solutions organization.
Network Systems unit will focus on providing both fixed and mobile network infrastructure, including the company's innovative Flexi base stations, core products, optical transport systems, and broadband access equipment. Marc Rouanne, currently head of the company's Radio Access business unit, will assume leadership of the Network Systems organization.
Global Services unit will focus on improving operational efficiency through outsourcing of non-core activities, and ensuring fast and cost-effective implementation of new networks and network upgrades. Ashish Chowdhary, currently head of the company's Services business, will assume leadership of the Global Services organization.
Rouanne and Walter will join the company's executive board, effective January 1, 2010. Chowdhary is already a member of the executive board and will remain in his new role.
Further, Nokia Siemens said it aims to reduce annualized operating expenses and production overheads by EUR 500 million by the end of 2011 over a year ago.
The operating expense and production overhead savings are expected to come from a wide range of areas, including real estate, information technology, site optimization, strategic workforce rebalancing, and overall general and administrative expenses.
As part of its effort, Nokia Siemens plans to conduct a global personnel review, which may lead to headcount reductions in the range of about 7% to 9% of its workforce. The company currently has about 64,000 employees.
Nokia Siemens estimate total charges related to the reductions to be in the range of EUR 550 million over the course of 2010-2011.
In addition, the company plans to reduce its annual product and service procurement costs related to cost of goods sold that is substantially larger than the targeted EUR 500 million in operating expenses and production overhead reductions.
Further, Nokia Siemens said it intends to expand and strengthen its business through partnerships and acquisitions. The company said it would target assets that enhance the scale of existing product and service business lines and that deepen relationships with key customers.
Nokia is currently trading at $12.62, down 13 cents or 1.02% on a volume of 8.68 million shares.
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