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A tale of two strategies

Nokia Siemens Networks and Ericsson have implemented contrasting strategies, one favouring specialisation and the other strength in breadth.

James Middleton

December 18, 2012

4 Min Read
A tale of two strategies

Infrastructure vendor Nokia Siemens Networks (NSN) is set to exit 2012 having shed almost every operation it does not consider a core asset, in line with the restructuring plan it outlined in November 2011.

The year culminated in parent company Nokia selling and leasing back its head office building in Espoo, Finland, because “owning real estate is not part of Nokia’s core business”. The firm received €170m for its headquarters from Exilion Capital, a company owned by four Finnish institutions specialising in the management of real estate private equity funds.

Nokia recently posted an operating profit of €182m for the third quarter of 2012, coming up from a loss of €227m in the previous quarter and a loss of €114m in the third quarter of 2011.

In a quest to complete its transformation into a “mobile broadband specialist,” NSN has now divested seven of its “non-core” business assets since November 2011. “During 2012 Nokia Siemens Networks has made tremendous progress in the transformation of our company to being the world’s mobile broadband specialist. Our strategic focus on our core markets has enabled us to concentrate our energy and investment in areas such as LTE where we have strengthened our global leadership position,” said Rajeev Suri, chief executive officer at NSN.

The most recent operational disposal was NSN’s business support systems (BSS) unit, which went to billing and charging software provider Redknee. Under the terms of the deal, approximately 1,200 NSN employees will transfer to Redknee. Earlier this year the vendor outsourced a portion of its OSS and Subscriber Data Management activities to Finnish managed services player Tieto.

In the same week, the company announced plans to offload its optical networks business to investment firm, Marlin Equity Partners, and have the business spun off as a separate company that intends to run as “an industry leader in the fragmented optical networking sector.”

As a result of the transaction, up to 1,900 employees— mainly in Germany, Portugal and China—are expected to transfer to the new company in line with applicable local legal requirements. The transaction is expected to close in the first quarter of 2013 and will be headquartered in Munich, Germany.

Earlier in the year, the fixed-wireless broadband business, which NSN acquired as part of the Expedience portfolio it bought from Motorola Solutions networks, went to privately held Spanish firm, CN Tetragen. Meanwhile the broadband access unit was sold to US firm Adtran, the WiMAX business went to infrastructure player NewNet Communication Technologies and the microwave business to DragonWave.

These deals involved around 1,000 staff transfers in addition to the 17,000 staff reduction announced in November, taking the total number of staff reductions announced so far past 18,000. As it seeks to refocus, the company is looking to third parties to bolster its offerings. In the summer the vendor signed a global reseller agreement with wifi specialist Ruckus Wireless to help operators integrate wifi coverage as part of its small cells portfolio designed for mobile broadband services, a strategy which fits with its mobile broadband strategy.

There are three further units that NSN has identified as being non-core: Perfect Voice, the firm’s fixed line VoIP offering; Narrowband and Carrier Ethernet.

“We’ve not made any announcements about these businesses—they are in maintenance mode,” an NSN spokesman said. “We think the industry is evolving towards vendors that are focused and not ones that try to be end-toend. We see that as something our customers are supporting and actually now our competitors are trying to copy it.”

Conversely, Ericsson is focused on leveraging assets that it has acquired in recent years. Building on the acquisition of Telcordia in 2011, B/OSS has become a key strategic area for Ericsson to focus on as it is so closely tied to SDN (software defined network) evolution, according to CTO Ulf Uwaldsson.

In line with NSN’s deal with Ruckus, Ericsson has also recognised the challenge in integration of wifi technologies with those developed by the 3GPP. Building on another acquisition— BelAir networks in April of 2012—Ericsson is now tackling the issue with a wifi controller interface that talks to the 3GPP core, allowing operators to apply the same policy control and charging mechanisms. The company unveiled the first product to make use of this technology in October, with the launch of a stadium optimised wifi access point and controller.

And with Redback, which gave it strong assets in IP routing technology, the firm acquired the “glue” to hold broadcast, IT and telecoms services together in the broadcast services division of Technicolor.

Nonetheless, Ericsson has not avoided some dieting of its own. In August, US access solutions provider Calix acquired the company’s fibre access assets and more recently the company began to cut 1,550 jobs in its native Sweden, following third quarter earnings in which it saw a 42 per cent year on year reduction in net income.

But still, Ericsson has an extensive portfolio of businesses and was even in the frame to pick up NSN’s BSS unit. It will be interesting to see how the two strategies play out, with Ericsson looking to function as a one-stop shop, while a streamlined NSN is keeping its focus very much on mobile broadband, with radio access and core at the heart of the strategy, but supported by customer experience management, network intelligence and services.

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About the Author(s)

James Middleton

James Middleton is managing editor of telecoms.com | Follow him @telecomsjames

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