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Nokia Siemens Another Nortel in the Making?

Is Nokia Siemens Networks (NSN) about to fall apart like its rival, Nortel Networks?

That’s the prediction from one unnamed industry observer, and the expectation, sadly, does not seem off base. This week alone, NSN has fallen prey to rumors that parent companies Nokia Corp. and Siemens both want to unload their stakes in the not-so-profitable joint venture. And on Tuesday, NSN announced it’s outsourcing more than 170 key jobs to third parties. The move will reduce NSN’s costs, including overhead, salaries and benefits.

Companies don’t generally make such changes unless they’re in dire straits. Indeed, NSN has been hit by stiff, unexpected competition from lower-cost vendors from China (Huawei, ZTE). On top of that, NSN has failed to produce the kinds of telecom products it thought the market would demand.

The situation looks much like the ill-conceived union of Alcatel and Lucent. And if two-year-old NSN needs a buyer, which it seems to, who would that be? Probably not Alcatel-Lucent. Certainly not Nortel. Perhaps a Chinese company, if it wanted to shoulder the problems created at NSN. Maybe NSN’s best option is to part itself out, as Nortel has done. The anonymous analyst says NSN’s “only real valuable piece” remains its mobile unit, which, nonetheless, has been losing ground to Huawei and lacks “any substantial 4G business.”

Recall that NSN wanted to buy Nortel’s 4G assets at auction earlier this summer; however, it was outbid, by millions of dollars, by Ericsson. The loss dealt quite a blow to NSN and has left it searching for a viable business strategy.


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