The Nokia Siemens Networks (NSN) merger of the two company’s telecommunications infrastructure businesses continue to come under huge pressure, handing ever more advantage to mobile market leader Ericsson. And now Siemens is publicly hinting at wanting an early exit from NSN after only six months.
Siemens’ new CEO, Peter Loescher, cast doubt on both his company’s major joint ventures ‘ NSN and the Fujitsu Siemens operation in computing ‘ as he started to set out his restructuring plans, trying to start with a clean slate after the settlement of the long running major fraud investigation that has plagued the German company. Loescher said in a statement: ‘We are absolutely not satisfied with NSN’, though did not go as far as to say Siemens would like to exit that venture or the Fujitsu Siemens set up. There has been rising speculation however that this is his goal. Major German trades union IG Metall said last week that Siemens might be looking to get rid of its 50% stake in NSN, following management briefings. However, under the terms of the six-year deal, either party can only sell its stake with mutual consent before 2013.
NSN has seemed jinxed almost from the start, when its planned January 1 kick-off was delayed by the Siemens probes. Although it has scored some significant deals since then, it has struggled to deliver the growth and efficiency gains that the markets had hoped for from the alliance. In July, it became clear that NSN had dragged down an otherwise copybook second quarter for its Finnish parent, with a loss in its first quarter as a joint venture.
The organization reduced its growth expectations almost as soon as its commenced operations at the start of April, but was still forecast to make a positive EBITDA. But instead, it reported an operating loss of €1.3 billion on sales of €3.44 billion. ‘Both net sales and margins were weak and these adverse developments require decisive action,’ Nokia said in a statement at the time. Cost cutting efforts were accelerated to try to achieve the planned savings by the end of 2008 rather than by 2010.
Last week, Siemens accepted a €201m ($284.1m) fine from the Munich District Court and reached a settlement with German tax authorities on questionable payments, ending investigations into illegal conduct and tax violations at its former communications unit. This ended German investigations into illegal conduct and tax violations at the unit, with Siemens waiving its right to appeal.
However, the group is still under investigation by the European law enforcement agency, the US Department of Justice and the US Securities and Exchange Commission for suspected bribery involving ‘ according to a Siemens internal probe as reported in the Wall Street Journal ‘ some €1.6 billion.
Loescher has announced a restructuring along the lines of Siemens’s three remaining major businesses – infrastructure/industry, energy and medical technology. The heads of these units will sit on the group’s central management board, reducing the power of previously dominant regional bosses and seeking to increase streamlining and accountability. Loescher will present a detailed plan on November 28 and in the meantime is expected to identify further units for sale, following the divestment of the automotive division to Continental AG. The trains business and the Osram lighting unit are possible candidates for sell-off. Loescher says a key growth objective is to increase focus in Asia.