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Like That Little Engine, Nokia Siemens Thinks It Can Make It

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engineimage-300x277Nokia Siemens, a telecommunications equipment joint venture, plans to lay off up to 5,700 employees, or 7-9 percent of its work force, in order to cut about $740 million in costs. The company, which is a joint venture between Siemens (s si) and cell phone maker Nokia (s nok), will also whittle down to three business units from five. But you wouldn’t really get it after reading the headline on its press release which states, “Nokia Siemens Networks Targets Improved Financial Performance, Return to Growth.”

Look, I get that you probably don’t want to title your press release, “We’re Laying off 5,700 Workers,” but the headline chosen is too divorced from reality for my tastes. Emphasize the positive by all means, but the title amounts to wishful thinking, especially given the incredible difficulties the entire telecommunication equipment market faces. Remember Nortel (s nt)? Like that “Little Engine that Could,” Nokia Siemens may think it can, but this isn’t a children’s story, and it might not have a happy ending.

With intense competition coming from European competitors Alcatel-Lucent (s alu) and Ericsson (s eric) and even more fierce rivalry from the upstart Asian vendors, Huawei, and ZTE, selling telecom equipment is getting more cutthroat. The company is dragging down its backers, with Nokia marking down $1.4 billion of its investment in the joint venture during the most recent quarter, despite efforts a year ago to cut costs. Cutting costs is only going to take Nokia Siemens so far, and it’s not likely to get it over the hill into profitability and growth.

3 Responses to “Like That Little Engine, Nokia Siemens Thinks It Can Make It”

  1. ZTE and Huawei are a threat to all of the established players – not just Nokia-Siemens . Why would this not be a problem for Ericsson, etc. ? If restructuring and cutting costs is not enough what do you suggest they do?

    Should N-S have done nothing? Wouldnt that have made them one of the big trains that didnt even try? (And if N-S are like the little train, doesnt that mean that they can)

    I find this critique of Nokia-Siemens press release for a head line that wasn’t supported by the text rather ironic.

  2. Whenever a company with it’s sunny days behind it makes an overtly positive sounding statement, you can easily understand the reason. In this case, it is those 5700 people who are the cause of all that is wrong with the company. And now that they have been given the golden handshake, the company is well on it’s way to profitability. Nevermind that most of those 5700 people were not decision makers. Nevermind that the decision makers responsible for the current state of affairs still remain at large within the company. Nevermind that the route to profitability might not be the route to growth (meaning, reducing addressable market implies typically reducing losses during a downturn, but can never lead to growth if/when the market surges). Elephants don’t outrun leopards. Yes, they outweigh them. But an elephant on a diet will still not outrun a leopard.