At the end of October Alcatel Lucent announced
that it would cut a further 4,000
jobs before 2009, bringing the total number
of workers axed since the merger to 16,500.
The news came as the company reported
its third consecutive quarterly loss, sinking
to a shortfall of �258m during the three
months to the end of September, compared
to a profit of �532m in the same period last
year. Revenues were down 7.8 per cent year
on year to �4.35bn.
Against the odds Russo held onto her job,
but CFO Jean-Pascal Beaufret stepped down
to “pursue other opportunities”.
One man who will understand, more than
most, the pressure Russo has been under is
US stalwart Motorola’s CEO Ed Zander. Motorola’s
high-profile struggles in 2007 mostly
centred on the company’s handset business,
but networks weren’t fairing much better.
Zander spent a good portion of 2007 fire fighting
shareholder activist Carl Ichan’s advances
and accusations of mismanagement.
Finally though, on 30th November, Zander
announced that he would step down from the
top job, effective 1st January 2008. Zander will
be replaced by the firm’s COO, Greg Brown,
and will retain the position of chairman of the
board until the annual stockholders’ meeting in
May. Some question the wisdom of hiring from
within in such a situation. If Brown was unable
to stop Moto’s woes while occupying the chief
operating officer’s chair, what exactly he’ll bring
to the chief executive spot is unclear.
Brown’s first task will be to find a new CTO.
Days after Zander announced his departure,
his colleague Padmasree Warrior jumped ship
for the CTO job at Cisco. Looking slightly further
ahead, Brown could also play an instrumental
role in another industry mega-merger.
Nortel looks a likely candidate, since the two
North Americans are not a million miles apart
geographically or culturally.
Mike Roberts, principal analyst, Informa
Telecoms & Media thinks it could happen:
“There will be more consolidation in 2008.
Ericsson, Nokia Siemens Networks and Alcatel
Lucent have established themselves as the top
three vendors, but the networks business of
a number of other vendors are still exposed.
One possibility is that the long-mooted merger
of the networks units of Motorola and Nortel
will finally happen in 2008.
“Overall we expect more deals throughout
2008 as smaller mobile infrastructure vendors
take tough decisions about their core
strengths,” added Roberts. “However, some
Mobile Communications International | First for news, best for business
It’s not all bad news
though. With next
generation technologies
on the horizon, there are
plenty of lucrative upgrade
contracts coming up
of the smaller vendors are unlikely to take
part, including Huawei and ZTE, which are
probably happy to continue taking market
share partly through fierce price competition.
Others, such as Samsung and NEC,
are part of larger conglomerates that do
not have a history of selling of particular
business units.”
When MCI spoke with Huawei CMO, Zijhun
Xu, in April he didn’t rule out such a move
saying that Huawei has not yet decided how
it will “play in a tide of mergers and acquisitions.”
What he did question, however, are
the benefits that these plays will bring their
participants. “These mergers have not changed
the cost structure of these companies as a
whole. So whether one plus one is equal to
two, greater than two, or less than two is
dependent on their future performance. I
don’t think that, in the future, economy of
scale will guarantee success.”
The network divisions of Nokia and German
infrastructure firm Siemens tied the
knot in March. Both companies also agreed
to increase their respective contributions to
the new 50:50-owned company, with Siemens
to contributing �2.4bn and Nokia to contribute
�1.7bn.
At the time, the companies stated that they
expected a substantial portion of cost reductions
to be realised via a reduction in staff
levels over the next four years. Between 10-15
per cent of the initial combined staff base of
about 60,000 are expected to go.
Estimated cost synergies of �1.5bn annually
by 2010 are expected to come primarily
from the elimination of overlapping functions,
consolidation and better use of sales
and marketing organisations, reduction of
overhead costs, sourcing benefits, and greater
efficiencies in R&D, the companies said.
In April the Finnish-German JV said: “Over
the last couple of months there has been a
narrowing of visibility and indications of
a slowdown in spending in some regions.”
VENDOR MARKET FEATURE
Updating its outlook for the mobile and fixed
services infrastructure market this year, NSN
stated it expected only “very slight” market
growth for the mobile and fixed infrastructure
and related services market.
The firm started shedding weight in May.
In Finland it proposed reductions of 700
employees in the initial consultation process.
By the end of 2010, the company expects an
adjustment in Finland in the range of 1,500
to 1,700 employees, including the initial 700.
In Germany, the company will start consultations
related to the proposed adjustment of
2,800 to 2,900 employees between now and
the end of 2010.
In October, Siemens’ CEO Peter Loescher,
commented on “the weak and therefore unsatisfying
operating performance of the joint venture,”
following Siemens’ equity Investment
unit posting a loss of �11m in the quarter to
end 30th September, compared to a �75m gain
in the same period a year earlier.
The firm said the loss was due largely to
NSN, which became part of Siemens Equity
results following its formation in the previous
quarter. Restructuring and integration
programmes resulted in charges totalling
�86m at NSN and Siemens incurred an
equity investment loss of �58m. In the
current year, NSN took �991m in charges,
including �646m in severance pay. As a
result, Siemens’ equity investment income
related to NSN was a loss of �429m for
fiscal 2007, the company said.
The assessment seems a bit one sided
though, as Finnish parent Nokia recently
turned in Q3 results for 2007 that were 85
per cent up, year on year. Reports suggest
that Siemens is willing to stick it out, a little
longer at least.
It’s not all bad news though. With next
generation technologies on the horizon, there
are plenty of lucrative upgrade contracts coming
up. Operators polled as part of Informa
Telecoms & Media’s Mobile Industry Outlook
2008 report were asked ‘which technology
provides the biggest revenue opportunity for
equipment vendors?’, HSPA came out on top in
both the short term (the next two years) and
the long term (the next five years). According
to the report, managed services and WiMAX
also came out as major opportunities.
The good news for all the companies
mentioned in this piece is they’re all active
in HSPA, managed services and WiMAX.
Which, all things considered, is also the
bad news. �
41
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.