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  • Writer's pictureTeresa Mastrangelo

NSN – “We’re goin’ Mobile”

Last week, Nokia Siemens Networks announced a major restructuring of its business and a new strategy focusing on Mobile Broadband and Services.  These plans also include the layoff of nearly 25% of its workforce over the next 18 months as it “adapts, exits or maintains” a number of current businesses.

This is not the first time (and probably not the last) that NSN has restructured.  Back in 2009, the company announced that it would restructure from 5 business units into three: Business Solutions, Network Systems and Global Services, effective January 1, 2010 – this resulted in a workforce reduction of approximately 8% of its then 64,000 employees.   At this time, NSN said it would focus on more product and technology partnerships, such as its joint venture with Juniper Networks. and would also look to strategic acquisition opportunities that would either increase its customers base or augment its product portfolio.  As such, NSN acquired Motorola’s wireless networks business for $1.2 billion in July 2010.  In August 2011, NSN announced the layoff of 1,500 employees that made up the WiMax and GSM divisions from its Motorola acquisition.

History lesson over.  Back to the  present.

According to NSN’s CEO Rajeev Suri, telecommunications infrastructure is no longer an industry that offers strong growth rates – however, there remain pockets of opportunity and NSN will focus on those areas that offer growth.  As such the new strategy will revolve around three areas:  focus, innovation and quality. 

The focus going forward is on providing End to End Mobile Network Infrastructure and Services, with an specific focus on Mobile Broadband.  By eliminating areas with slower growth, NSN will be able to focus more of its €2 billion R&D budget where it will receive the greatest return on its investment and will enable NSN to increase its spending on mobile broadband innovation and double its spending on quality practices and processes.  NSN believes these are areas where they can differentiate from its competition – who will remain burdened by their fixed network assets.

So what happens next?  NSN plans to separate their businesses into four categories:  lead, attach, adapt and exit or maintain:

  1. Mobile Broadband and Customer Experience Management will be the lead businesses, where NSN will maintain or increase investments to ensure a strong market position.

  2. Care and Network Implementation – both part of Global Services – will be attached closely to, and expected to perform in parallel with, the lead businesses.

  3. Managed Services and Consulting and Systems Integration – also both part of Global Services – will be adapted to meet the narrower portfolio and deliver greater profitability.  Optical Networks will also be in this category, with a focus on building a strong base of select customers and leveraging its strong relationship to mobile broadband. 

  4. A wide range of other businesses – such as perfect voice (fixed-line VoIP), broadband access, WiMAX, narrowband, carrier Ethernet, business support systems (BSS), and communications and entertainment solutions (CES) – will be targeted for exit (possibly through divestment) or put in maintenance mode. 

Does any of this really surprise anyone?  Nokia and Siemens Carrier Network Division formed the NSN Joint Venture back in 2006 to better compete with the recently merged Alcatel/Lucent and Ericsson/Marconi.  The JV created a top 3 infrastructure powerhouse that was well poised to leverage opportunities in Fixed-Mobile Convergence.  The problem was that Nokia brought very little to the table, except handsets  – and we all know how that has turned out….leaving the Siemens side responsible for infrastructure solutions.  While technically competent, Siemens was never know for moving quickly or for significant innovation – instead focusing on their engineering expertise, rather than on the direction of the market.  A savvier company would have forced the direction of the market and perhaps FMC would have materialized into a fruitful service for fixed network operators.

Over the last few years, we have watched the leading provider of circuit switched voice infrastructure – divest most of its interest in this area.  At the same time, they acquired a very nimble IPTV middleware provider – Myrio and allowed it to wallow and fall far behind its competitors, but doing just enough work to keep Belgacom and KPN happy. From an access perspective, NSN was once a top 3 provider of DSL equipment – albeit most of it was to Deutsche Telekom, but they still remain a Top 5 player.  NSN was also early in the GPON space, but chose to exit this market in 2008 to focus on VDSL – leaving it open to Huawei, ZTE and ALU in its key markets.

There is no doubt that mobile broadband is the direction of the market, but at some point, just like the fixed market – things will saturate and the cost to run and maintain the network will continue to rise.  There will always be fixed instructure – even if its only purpose is to support the mobile network.  Nonetheless, the days of massive infrastructure investment are likely over and the real focus will be on applications and capabilities that will make networks run more efficiently and provide a better quality of experience for the end user. 

For me personally, I have never really considered NSN an innovator. They have already had so many opportunities to innovate and have failed on each occasion, but LiquidNet was a departure from the norm and signals that perhaps NSN’s compass is finally going in the right direction.


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