BERLIN — Nokia Siemens Networks, the equipment joint venture of Nokia and Siemens, said Wednesday that it planned to cut almost a quarter of its workforce as it sought to bolster profit in a stagnating market for network gear.
The company said it planned to eliminate 17,000 jobs by the end of 2013 in a wide-ranging austerity program designed to refocus Nokia Siemens on mobile broadband equipment, the fastest growing segment of the market. The reductions will slash the company’s workforce by 23 percent from its current level of 74,000.
The cuts follow Nokia Siemens’s $1.2 billion purchase of Motorola’s mobile network equipment business in July 2010, which added staff. Rajeev Suri, the Nokia Siemens chief executive, said the reduction would help the company trim annual operating expenses by €1 billion, or $1.35 billion, by the end of 2013 from its level at the end of this year.
“As we look towards the prospect of an independent future, we need to take action now to improve our profitability and cash generation,” Mr. Suri said in a statement. “These planned reductions are regrettable but necessary. It is our goal to make them in a fair and responsible way, providing the support we can to employees and communities.”
Nokia and Siemens, equal partners in the business created in 2006, have been looking to sell all or part of the venture, which has suffered from competition from low-cost Chinese rivals like Huawei and ZTE. In September, Nokia and Siemens injected a combined €1 billion into the venture to support its operations. In the statement, Mr. Suri did not address the search for new investors.
Hakan Wranne, an analyst at Swedbank in Stockholm, said the personnel reductions were a signal from Nokia Siemens that the company would no longer be a global equipment vendor, but would focus on limited parts of the market. In remarks to analysts on a conference call this afternoon, Mr. Suri said Nokia Siemens would remain a “European” company.
Nokia Siemens had been reporting quarterly losses for most of the past two years. In the third quarter, the company reported a €6 million operating profit, following a €116 million loss a year earlier, as sales rose 16 percent to €3.4 billion. It was the fifth consecutive quarter of sales growth for Nokia Siemens.
Mr. Suri said Nokia Siemens planned to revamp its operation, eliminating overlapping management and seeking cost savings by consolidating offices and other sites, and by centralizing activities in global delivery centers.
The company, which is based jointly in Espoo, Finland, and in Munich, did not say where it planned to eliminate the jobs. Most of the employees work in Finland and Germany.
Shares of Nokia rose 1.2 percent in Helsinki trading to €4.23 a share, while shares of Siemens were little changed at €69.51 in Frankfurt.
In his remarks on the conference call, Mr. Suri said the networking equipment business had matured and was no longer experiencing “jaw-dropping” rates of sales and profit growth.
“At Nokia Siemens, we believe the future of our industry is in mobile broadband and services,” Mr. Suri said.
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