Nokia Siemens Plans Management Overhaul to Cut Costs
Nokia Siemens Networks plans to revamp its management in Europe and Latin America, closing down functions and simplifying its structure as the wireless-gear venture of Nokia Oyj (NOK1V) and Siemens AG (SIE) cuts costs.
Eduardo Araujo, head of Latin America, is set to leave as Nokia Siemens dismantles parts of its organization to become more aligned with customers rather than regions, according to a memo sent to employees and obtained by Bloomberg News. The company said in the memo it will look for a replacement for Araujo, who started in his role in 2011.
The overhaul is part of a broad cost-reduction effort that began more than a year ago. Nokia Siemens, based in Espoo, Finland, started a program in late 2011 to cut 17,000 jobs, or about 23 percent of the total, to be more competitive against Ericsson AB (ERICB) and Chinese rivals such as Huawei Technologies Co.
“The planned new set-up will allow us to operate in a simpler and more agile way and hence at lower cost,” Rene Svendsen-Tune, head of Nokia Siemens’s customer operations in Europe and Latin America, said in the memo. The plan is set to be implemented by July 1.
Nokia Siemens has a “fairly complicated and inflexible” structure in Europe and Latin America, Svendsen-Tune said. The changes will improve customer relationships, he said.
The company will start talks with labor representatives over an unspecified number of job cuts that will result from the revamp, according to the memo. The cuts are part of those announced in 2011, the company said in an e-mailed statement.
“While we have made remarkable progress, we also recognize that there is more to do in order to increase efficiency,” the company said in its statement.
Nokia Siemens is on track to exceed its target of saving 1 billion euros ($1.3 billion) in operating expenses by the end of this year, Nokia Siemens Chief Executive Officer Rajeev Suri said in February. The company aims to seize growth opportunities when the market is growing and focus on improving margins where industry revenue doesn’t increase, he said.
Nokia fell 0.5 percent to close at 2.91 euros in Helsinki trading. Siemens added 1.3 percent to 82.29 euros on the Frankfurt exchange.
The cost-cut effort is taking place as Espoo-based Nokia and Munich-based Siemens are considering options for the six-year-old partnership, with Siemens pushing for an exit. One scenario under discussion was a joint buyout of Siemens’s 50 percent stake by Nokia and a strategic partner, people familiar with the situation said in February.
Siemens’s efforts to exit have accelerated since Marco Schroeter, the venture’s chief financial officer, was pushed out in February, according to a person familiar with the situation. Schroeter is close to Siemens CFO Joe Kaeser, the person said. The appointment of former operating chief Samih Elhage in Schroeter’s place has led to a deterioration in relations between Siemens and Nokia, the person said.
James Etheridge, a Nokia spokesman, and Wolfram Trost, a Siemens spokesman, declined to comment.