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.
Microsoft has found a powerful incentive to get people to use Windows Mobile--at least those within its own ranks.
The software maker has stopped paying for cellular data plans for those using BlackBerries, iPhones and all manner of non-Microsoft devices.
Plenty of Microsoft workers still have an iPhone, but as of earlier this year, they can no longer be reimbursed for their data plan unless they switch to a Windows Mobile-based phone.
(Credit: Apple)Although the move took place earlier this year, it is only making headlines now, thanks to an article on Silicon Alley Insider.
It's hardly a shocking move. Lots of companies standardize on a particular mobile operating system or two and limit reimbursements to those devices.
A Microsoft representative confirmed on Monday that "the data plan reimbursement for Microsoft employees is limited to Windows Mobile devices."
"This policy took effect as part of the broader cost saving measures announced earlier this year," the representative said in an e-mail. The software maker has trimmed its product line, cut staff, and also pulled back on spending on travel, vendors and contractors.
As the recession takes its toll, Motorola announced Wednesday that it is cutting compensation and benefits packages for its employees, including top executives.
Co-CEO Greg Brown will forgo a 2008 cash bonus earned under his incentive plan, while co-CEO Sanjay Jha will forfeit his cash bonus at a similar level as Brown's and take the remainder of his cash bonus in restricted stock.
Beginning in the new year, Motorola plans to suspend its matching 401(k) contributions, leaving employees to be the sole contributors to their 401(k) plans.
And a number of Motorola employees will face a salary freeze in the new year, with co-CEOs Brown and Jha taking a 25 percent cut to their base salary.
Beginning March 1, Motorola will permanently freeze its U.S. pension plan, preserving the vested benefits accrued by employees and retirees, but canceling future benefit accruals. The company, however, will continue to fund its pension obligations to current and future retirees.
"The sustained downturn in the global economy requires that we take these difficult but necessary steps," Brown and Jha said in a statement. "While serving our customers remains a top priority, we are equally focused on our cost structure, and we will continue to implement appropriate measures to conserve cash and reduce expenses."
The compensation hit is just the latest blow to Motorola, whose troubles reach back before the onset of the current economic crisis. Earlier this month, for instance, Standard & Poor's dropped the phone maker's credit rating to junk status.
Motorola fell 4.31 percent to $4.22 a share in early morning trading Wednesday.
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