The Nokia-Siemens Train Wreck

It doesn’t bode well for Nokia-Siemens Networks (NSN) achieving a successful IPO that there were some 500 jobs being advertised on the day it announced it was sacking a quarter of its workforce.

Companies choose the time they announce sackings. Routine efficiency dictates a scrutiny of the hiring programme before announcing 17,000 firings.

Like Alcatel-Lucent, the four year-old NSN hasn’t come to terms with the competition from Huawei and ZTE which have bagged up a 30%+ market share in EMEA.

Alcatel-Lucent has seen its market cap drop to $5.3 billion from $111 billion in 2000. Alcatel-Lucent’s 18,800 patents are estimated to be worth $9 billion -so the value of the rest of the company is seen as substantially less than zero. Questions are being asked about the future of the management.

NSN is not publicly quoted – but it wants to be. Its parents plan to IPO this unpromising child in 2013, but a Q3 2011 operating loss of €114 million followed by a parental injection of another €1 billion into the company last September, is not positive.

Ominously for NSN employees, in September Nokia and Siemens appointed a chairman for NSN who was previously the CFO of a network. CFOs typically cut, not build.

Even the private equity company KKR, with a reputation for over-paying for European tech assets, couldn’t be persuaded to buy NSN when it was offered to them.

The NSN strategy is not to grow its way out of its problems but to shrink its way out.

NSN is expected to exit its Wimax and carrier Ethernet businesses, drop its fixed-line VoIP and broadband access businesses, and get out of its business support and entertainment products.

CEO Rajeev Suri says that NSN will focus on wireless broadband. In July 2010 it paid $1.2 billion for Motorola’s wireless network equipment unit. “Our goal is to provide the world’s most efficient mobile networks,” says Suri.

But not, it seems, the most cost-efficient.



  1. Its not the sort of thing you do just before an IPO, however since the IPO is in 2013(a lifetime by trading standards), it gives Suri a chance to “make a growth story” in the intervening period and then present it to the market with the right powerpoint projection. Right now the story would be one of decline. Its all about having the sentiment and right line of bullshit by the time of the IPO. Traders know it and will go along and flog it to your “high growth” pension fund. Its the same psychology as when a new hire CEO comes in and always “discovers” a dire financial position which is really never as dire as presented. Then when the “better” numbers come in he looks like he’s doing his job.
    The reason that everyone is not making money anymore in wireless backbone is simple. Its been saturated and so the business has turned to shit. Consumers still haven’t swallowed the last round of upgrades, let alone thinking of the next one and the telco’s aren’t really competing on features anymore. I have no idea what they are doing. Playing golf together I suspect. A possible backbone growthstory could be satellite backbone by Lightsquared or Dish Network, but these are untested. I suspect they wont maybe it as the whole alternative superwifi thing seems to have fizzled.

  2. As an ex-employee of NSN, I believe they go nowhere.
    Their criteria for hiring and firing does not seem correct. To my experience they keep people who talk a lot and release quiet hard workers. There is a bullshitting-passion confusion all over the company.

  3. Good luck,Thiru, It gives the appearance of knee-jerk decision-making. I hope this is not the case.

  4. Hi David
    Thanks for the advice but please keep it. How many other company websites you have checked in the past just before they announced job cuts? It might be your wishful thinking that NSN would blink but even though our jobs are at risk this is not an avoidable shrink we need to achieve if we want to have any chance of growth later on. See you later after 2013.

  5. It’s just that if things are heading towards the point where you have to sack
    a quarter of your staff, Jonny, sometime before that point is reached the management should have implemented a hiring freeze.

  6. As an NSN employee it is obviously a concern, but from a business point of view we mostly understand that some tough decisions need to be taken, and soon. We are puzzled as to why it has taken so long.
    The point about the 500 vacancies is feeble though. You cannot delete all vacancies ahead of the announcement, as this gives the whole game away ahead of time. The number now showing is 7 vacancies (4 in India and 3 in Brazil)

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