HELSINKI (Reuters) - Nokia Siemens Networks NOKI.UL, the world’s second largest maker of mobile phone network equipment, is to axe 17,000 jobs, nearly a quarter of its workforce, to help save about 1 billion euros ($1.35 billion) a year.
The company, which has struggled to make a profit since it was set up in 2007, did not say where it would make the cuts, part of wider changes that analysts said looked aimed at gearing up the company for an initial public offering.
NSN was formed by Finnish group Nokia NOK1V.HE and German conglomerate Siemens (SIEGn.DE) in the hope of getting enough scale to battle an industry dominated by Sweden’s Ericsson (ERICb.ST) and increasingly by Chinese entrants. But it has faced aggressive pricing from rivals and an economic downturn that has forced telecoms companies to cut spending.
The job cuts form part of plans for the company to focus on mobile networks and move out of fixed-line infrastructure.
“This is a big move. I believe the goal is an IPO,” said Swedbank analyst Jari Honko. “That cannot be done with the current structure and operation models.”
NSN raised 1 billion euros in late September from its parents to strengthen its balance sheet. Chief Executive Rajeev Suri said the venture would not need any further financing at this stage.
“As we look toward the prospect of an independent future, we need to take action now to improve our profitability and cash generation,” Suri said in a statement.
He said the company would focus on where it has scale adding: “We are a strong Number 2 in mobile broadband.”
Shares in Nokia were 1.3 percent firmer at 4.24 euros by 1342 GMT.
Siemens and Nokia have both said they want to make the venture more independent and see a listing as one of the options within a few years.
In July, they abandoned plans to cut their stakes in the venture after private equity firms failed to meet their asking prices.
Siemens has been looking for an exit since Peter Loescher took over as group chief executive shortly after operations between the two started.
In the third quarter, the venture made an underlying operating profit of 6.0 million euros on sales of 3.41 billion compared to a loss of 116 million euros in the same quarter a year earlier.
NSN employs about 74,000 people globally, with around 7,000 of those in Finland.
Finnish economy minister Jyri Hakamies told Reuters: “It is clear that it is very severe news from a Finnish jobs perspective. The changes for both (Nokia and NSN) are massive and they raise a lot of concern.”
Antti Rinne, leader of labor union Pro, said: “These numbers are shocking.”
Nokia has cut more then 10,000 jobs this year, including site closures in many countries.
Additional reporting by Terhi Kinnunen and Jussi Rosendahl; Editing by Jodie Ginsberg and Chris Wickham