[UPDATED] Saying that changes in the telecommunications industry require new thinking, Nokia Siemens Networks CEO Rajeev Suri has offered the initial outlines of a restructuring that will see the company focus on mobile broadband, customer experience management, and services. Suri expects the change to create operational savings of a billion euros by the end of 2013 through several means, including the loss of approximately 17,000 employees.
The company currently employs nearly 75,000.
“Telecommunications infrastructure is no longer an industry that offers the jaw-dropping growth rates and high gross margins of the turn of the century,” Suri told participants in a media and analyst conference call earlier today. “Overall, we expect only very modest growth across the industry in the coming years.”
For this reason, Suri believes that Nokia Siemens Networks needs to narrow its focus to what it does best. “I do not believe the industry structure any longer allows for end-to-end players to be successful,” he said.
What Suri believes the company excels falls into three application areas:
- Mobile broadband – including optical communications technology within Nokia Siemens Networks’ Liquid Network strategy
- Customer experience management
- Services for carriers
Areas that fall outside of these applications will be “managed for value,” which could mean divestiture or a shift into maintenance mode. Suri was reluctant to define areas he considered outside of the new focus, other than a reference to “wireline.” However, he did reveal that discussion with potential acquisition partners had already begun.
The work force reduction will be global in scope. Suri declined to provide details of where reductions would take place (either in geographical or organizational terms) or when. Divestitures could account for a significant portion of the 17,000 total. [UPDATE: But likely won't, according to a Bloomberg report that suggests the 17,000 will be in addition to any employees lost via divestiture.]
In addition to asset divestiture and shrinking employee headcount, Suri said the company will take other steps to reduce costs. These include elimination of the company’s original matrix organizational structure that involved significant “dotted line” management complexity, site consolidation, centralization of certain functional and delivery responsibilities, service efficiencies, further integration of assets acquired from Motorola, and general process simplification.
Most of Nokia Siemens Networks optical transport lines, particularly the hiT 7300 packet-optical transport system, would appear to be safe from divestiture. Suri stated that optical transport technology “is a critical component of a successful mobile broadband network” within the company’s Liquid Network concept. Nokia Siemens Networks recently announced 100-Gbps capabilities for the hiT 7300, tying it to the Liquid Networks initiative (see “Nokia Siemens Networks says 100-Gbps capabilities commercially available”).
In a briefing conducted in September, sources at Nokia Siemens Networks listed the following optical technologies as elements of Liquid Networks:
- WDM: software-configurable bandwidth, software-configurable reach; colorless/directionless/contentionless/gridless capabilities
- OTN: sub-lambda grooming and switching
- Next-generation optical access: 100-km reach, 1,000 subscriber coverage, 1-Gbps per user. This likely referenced Nokia Siemens Networks’ efforts to develop WDM-PON technology. Whether WDM-PON is now seen as an element of mobile broadband – perhaps as a vehicle for mobile backhaul – or outside of the new focus is currently unclear.