To improve its profitability, mobile network equipment maker Nokia Siemens Networks (NYSE:NOK) (NYSE:SI) has decided to sell off non-core units, focus solely on mobile broadband, and layoff approximately a quarter of its staff.
Formed by Finnish mobile phone manufacturer Nokia and German multinational industrial corporation Siemens, Nokia Siemens has struggled to reach profitability since its creation in 2007. The company has faced pricing pressure from Sweden’s Ericsson (NASDAQ:ERIC), who leads the the global mobile network equipment market, and Chinese telecommunication companies ZTE Corp and Huawei Technologies.
Investing Insights: Is Nokia’s Stock a Buy with the New Catalyst?
Nokia Siemens has entered talks with several companies to sell off its business support systems unit and its applications business, the companies chief executive Rajeev Suri said at a news conference held in Bangalore on Tuesday.
“Overall, we have about six divestments that have already taken place,” Mr. Suri said. The divestments will occur in areas that, “are either not core to our mobile broadband or we see that the profitability is not where we want it to be.”
Suri’s plan for restructuring seems to be paying off. Nokia Siemens has generated positive cash flow for three straight quarters, and he believes that growth to be sustainable. Even though Nokia Siemens has lost money ever since its founding, company executive board member Kenneth Wirth believes that current restructuring and new contracts should enable to the company to take market share from its competitors. He predicts that the company will surpass rival Huawei Technologies to take the number two position in the industry this year, and grow its market share from 18 percent to surpass Huawei’s 22.3 percent.
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