Nokia Siemens to cut 5 800 jobs

Nokia Siemens Networks will cut up to 5,800 jobs in an effort to save more than $1.48bn and so stay competitive in the network equipment market.

Telecom gear makers have been hit hard by the recession, which reduced operator spending, and by competition from China's Huawei and ZTE.

"To match the commercial flexibility demonstrated by Chinese vendors, NSN had to cut back its production, R&D and overhead costs," said Pal Zarandy, partner at telecoms consultancy Rewheel.

NSN, a joint venture between Nokia and Siemens, said it aimed to cut 500 million euros in annual fixed costs by the end of 2011, putting up to 5,800 of the firm's 64,000 staff at risk.

Workers in Germany and Finland protested against the plan.

"Shrinking more than the market is no honour for the top management," said Georg Nassauer, the head of the Nokia Siemens works council in Munich.

"With this kind of restructuring we are not gaining any customers or orders. It takes the power out of the company."

Nokia Siemens said the programme could cost 550 million euros in 2010-11.

The venture has posted some quarterly operating profits since it started operations in April 2007, but has mostly lost money - just like its rival Alcatel-Lucent who has posted losses for 12 straight quarters.

"They could be making money again in 2011," said SEB analyst Mats Nystrom.

"They have had catastrophic sales, but with cuts they could reach mid-single-digit margins from 2011. For higher margins, the market needs to turn to the better," he said.

NSN also said it aimed for savings "substantially larger" than 500 million euros by lowering procurement costs so it can cut prices.

"The recent consolidation among operators and moves towards network-sharing agreements will place greater pressure on equipment manufacturers such as Nokia Siemens to secure new business," said CCS Insight analyst Paolo Pescatore.

NSNS has been cutting costs and staff since its inception, unveiled a 1.5bn euro cost-saving programme the  month after it opened for business, which it then increased to 2bn. The prgoramme also led to 9,000 job cuts.

"Changes in the global economy and competitive environment make further cost reductions necessary," Nokia Siemens said.

Last month, parent company Nokia took a 908 million euro charge for the third quarter due to NSN. It said NSN's markets would fall by 5 per cent in euro terms in 2009 versus 2008, and the venture would lose more market share than expected.

NSN said on Tuesday it would shrink its five business units to three as part of the shake-up, and would consider partnerships and acquisitions to boost growth.

Rajeev Suri, new chief executive of NSN, said the revamp was designed to focus the business on providing services to operators, and developing the company's business in the developing world.

"I think Latin America, Africa and Eastern Europe play an important role in managed services," Suri said. So far only a few operators in these regions have started to outsource operations.

- Reuters

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