Nokia Siemens Networks Outlines More Details Of Strategy At Analyst Event

At its 2011 Analyst Event in Boston, Nokia Siemens Networks (NSN) outlined more details of its recently announced strategy review. In our view, the new focus NSN is taking is right. NSN is focusing on growth segments of the infrastructure market and will generate large savings from operating expenses and production overheads. In addition to its focus on providing the most efficient mobile broadband network infrastructure, NSN also highlighted the importance of customer experience management (CEM) as an integral part of its strategy.

NSN also provided more guidance on which market segments it no longer considers core. These include wireline, microwave, Wimax, perfect voice, and business support systems. Some of these, microwave and Wimax, it already spun off. NSN estimates that the overall revenue impact of its non-core disposals will total 10% of its current revenue base. The impact on profit will be less than 10%, as these non-core disposals are low-margin operations.

NSN believes that telcos increasingly demand end-to-end solutions from their equipment vendor partners. No equipment vendors can credibly deliver such end-to-end solutions on their own. Hence, NSN is positioning itself as an ecosystems manager for end-to-end solutions. As part of its innovation drive, NSN increasingly focuses on devising concepts for solutions rather than simply focusing on product upgrades. For instance, Liquid Net is a concept for network infrastructure design that supports a more efficient usage of underutilized infrastructure capacity based on a range of NSN products. Similarly, NSN places great emphasis on its CEM solution, which helps telcos to transform their services offerings by enhancing network-related features that affect customer experience and satisfaction.

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Nokia Siemens Networks Announces Radical Strategy Review

Nokia Seimens Networks’ top management has finally pulled the emergency brakes, after months of unsuccessful attempts to find a buyer. Going forward, NSN will focus on mobile network infrastructure and the services market. All other areas are non-core and subject to disposal. We estimate that about two-thirds of NSN’s current portfolio will remain in this new focus area. NSN will retain an attractive product and services portfolio and innovative solutions, as for instance its Liquid Net offering. However, some elements, like convergence offerings, will be difficult to pursue credibly in the future.

In our view, the new focus NSN is taking is right:

  • NSN is focusing on growth segments of the infrastructure market. NSN aims to provide the most efficient mobile networks (including network outsourcing and sharing) to extract maximum value for telcos’ operations by developing intelligent network solutions and boost customer experience management.
  • NSN will generate large savings from operating expenses and production overheads. NSN targets savings of €1 billion annually by the end of 2013. NSN tries to achieve this goal be focusing on organizational streamlining, real estate, information technology, product and service procurement costs, G&A, and supplier consolidation. Despite good revenue growth in recent quarters, NSN’s revenues per employee remain well below that of Ericsson’s in 2010 and even lags Huawei’s. NSN’s plans to reduce its global workforce by 17,000, or 23%, will go some way to address this imbalance.
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