Nokia Siemens to cut 17,000 jobs worldwide

HELSINKI: Nokia Siemens Networks, the unprofitable telephone-equipment venture of Nokia Oyj and Siemens AG, will eliminate 17,000 jobs worldwide in its biggest cull to narrow the gap behind market leader Ericsson AB.

The reduction, equivalent to about 22% of its workforce, will be completed by the end of 2013, when Nokia Siemens aims to cut e1 billion ($1.3 billion) in annual operating expenses and production costs. Nokia Siemens will focus on mobile broadband and services and plans to divest or "manage for value" units that aren't central to its focus, Espoo, Finland-based Nokia said on Wednesday.

Nokia Siemens received a cash injection of e1 billion from its parent companies in September as Jesper Ovesen, the former chief financial officer of TDC A/S, was named to oversee the restructuring as executive chairman. The venture, set up in April 2007 to compete against rivals such as Ericsson and Huawei, has fallen behind and has been unprofitable in all but one quarter.

"If you look at the last two to three years, it's become clear that Ericsson and Huawei are quite a long way ahead of the competition," said Mark Newman, chief research officer at London-based Informa Telecoms & Media. "NSN has struggled to remain competitive. It's gone through periods of being extremely aggressive in terms of pitching for new business because it realized it needed to win new contracts."

Nokia Siemens employed almost 75,000 as of September 30. The company generated sales of about $254,000 per employee last year, 19% less than larger rival Ericsson, based on numbers from the companies' financial reports. The figure for both manufacturers is sinking as selling prices for equipment such as base stations and packet-switching networks decline.

Nokia Siemens plans to simplify its organization, consolidate sites and functions, and strip out more jobs from the integration of Motorola Solutions Inc. units acquired this year, Nokia Siemens said.

Nokia Siemens hasn't decided how many jobs will be cut per country, spokeswoman Jozefa Terloo said from Munich. Negotiations with worker representatives will start immediately, she said. In Germany, the venture has about 10,000 employees.

"We need to take the necessary steps to maintain long-term competitiveness and improve profitability in a challenging telecommunications market," Chief Executive Officer Rajeev Suri said in a statement.

Assets that are peripheral to the new strategy include "a lot of wireline areas" as well as a unit that sells IPTV services to carriers, Suri said in an interview, adding that he doesn't anticipate announcements on a possible share sale or change of ownership in the near future. "We got a billion euros of equity committed by parents in September to support new strategy," Suri said. "We have a new executive chairman that sort of paves the way for independence. Apart from that, nothing else on the horizon."