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Damaged by lower sales, huge operating losses, and a falling market share, Nokia Siemens Networks is pinning its hopes on a major reorganization.
The network equipment maker, jointly owned by Nokia and Siemens, announced Tuesday that it will lay off 5,700 employees and cut its five business units to three as part of a plan to slash expenses by 500 million euros ($740 million) by the end of 2011.
The layoffs will represent around 7 percent to 9 percent of the company's 64,000 global employees and is likely to be felt across all countries in which Nokia Siemens has a presence. The company did not state which jobs would be affected but did say that any disruption to sales positions that deal directly with customers should be limited.
The three new revamped business units are expected to launch on January 1 and will include Business Solutions, Network Systems, and Global Services.
"As our customers make purchasing decisions, they want a partner who engages in issues well beyond a traditional discussion of technology," said Rajeev Suri, chief executive officer of Nokia Siemens Networks, in a statement. "Business models, innovation, growth and transformation are now very much front and center when it comes to the selection of a technology partner - and our planned new structure will position us well in this changing market."
The company said it's also looking at potential new acquisitions and partnerships that could enhance its product line or expand its customer base. In June, Nokia Siemens bought Nortel's wireless technology for $650 million.
"We recognize that we are operating in a market where customer needs are evolving fast," said Mika Vehvilainen, chief operating officer of Nokia Siemens Networks, in a statement. "We see acquisitions and expanded partnering as important tools to help meet these needs in the fastest, most efficient way possible."
Formed in early 2007, Nokia Siemens has seemed cursed from the start. Its launch was initially delayed a few months due to a bribery scandal involving several former Siemens executives.
The new company had hardly gotten off the ground when it announced it wouldn't meet financial expectations. And it's struggled since then, hurt by the economic downturn and increasing competition.
Third-quarter sales fell 21 percent to 2.8 billion euros, while its operating loss widened to 1.1 billion euros. Parent Nokia was recently forced to spend 908 million euros to write down the value of the deteriorating business.
This was originally posted at ZDNet's Between the Lines.
Oracle reports its fiscal second-quarter results on Thursday, and analysts are expecting weaker-than-expected license revenue, healthy maintenance subscriptions, a potential earnings miss, and some belt-tightening on deck. In other words, expect a mixed bag.
Wall Street is expecting earnings of 34 cents a share, excluding items and 26 cents a share fully loaded. Revenue is expected to be $5.86 billion, with gross margins of 77.5 percent, according to Thomson Reuters estimates. Analysts expect Oracle to deliver third-quarter earnings of 34 cents a share on revenue of $5.9 billion, but many expect that outlook to be cut.
According to various research reports, Oracle may have had difficulty closing deals in late November. Couple those problems with macroeconomic headwinds and analysis such as that of Oppenheimer's Brad Reback, who expects Oracle to cut costs and its outlook.
Reback reckons that Oracle can cut about $700 million to preserve profit margins without layoffs. Reback has noted that Oracle's headcount has swelled due to acquisitions, but that expenses per employee has remained at the company's historical $150,000 per employee plateau. Why? More international workers at lower pay.
Reback writes:
Given the macro environment, we believe (that Oracle) will have difficulty reaching (second-quarter) guidance and will likely lower revenue expectations Thursday. The question is what happens to margins and (earnings per share). Based on historical expense/employee data, we believe ORCL can cut about $700 (million) of expenses without having to reduce headcount, basically offsetting a (roughly 10 percent) decline in (calendar year 2009) license revenue. The 10 percent is less than half the reduction ORCL saw in 2002. Any further expense actions would likely entail headcount reductions. Note that 6 percent of headcount was cut in (fiscal year 2000), the largest such move over the last decade.
As for the details, Piper Jaffray analyst Mark Murphy is predicting a mixed quarter. In checks with 12 players in Oracle's ecosystem, he called the second quarter a jump ball. Here's what Murphy found:
- Oracle likely closed a $78 million deal in the quarter
- Business is solid among government customers
- Middleware and business intelligence apps are selling well
- Oracle Unbreakable Linux and Oracle OnDemand have minimal uptake
- Oracle is gaining share
- Customers aren't pressuring Oracle on maintenance pricing or renewals
Other analysts echo those points. Pacific Crest analyst Brendan Barnicle adds that the second quarter could have been much worse. Barnicle notes that many Oracle sales representatives missed their targets in the quarter,but quotas were so high that the company may have squeaked out some revenue gains year over year.
Nevertheless, application sales are slipping. Barnicle is expecting 3 percent growth for Oracle's new technology license revenue in the fiscal second quarter and a 10 percent decline in new application licenses.
Add it up, and you have:
- Worries about Oracle's revenue growth (but most expect that earnings will be fine)
- All eyes on the application business
- Solid database and middleware
- Plans to improve operating margins to navigate a downturn and currency fluctuations
One thing is certain: analysts agree that Oracle is much better positioned for a recession than it was last time around.
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