Daily Archives: December 1, 2009

Nokia Siemens Networks to Focus on Market-Share Gains and Reduced Costs

Even though it struck out twice in auction-ring swings for pieces of insolvent Nortel Networks, joint-venture Nokia Siemens Networks (NSN) apparently has devised another plan to improve its fortunes as a vendor of telecommunications-networking gear.

For the past two years, NSN has focused primarily on profitability at the expense of market share. Now, under new CEO Rajeev Suri, the company will switch gears, prioritizing market share ahead of all else. Reuters reports that Suri told Finnish daily Helsingin Sanomat the following:

“In early 2008 we made a strategic decision to focus more on cash flow and profitability than on the market share. Now it’s time to give it up and to focus on the market share.”

What NSN was doing wasn’t working, so a change of strategy doesn’t seem misplaced. Losing competitive ground to Huawei, ZTE, and Ericsson in the wireless-equipment market, NSN had reached a point where different, if not entirely desperate, measures were required.

To gain market share, however, NSN will have to become a different company. Its CEO concedes that the joint venture must position itself as a “cost leader” if it is achieve market-share gains without losing money. The company also agrees that it must become more aggressive with its pricing strategies and marketing.

As with its computer-networking brethren, such as Cisco and HP (now including 3Com), NSN will be turning to lower-cost geographic jurisdictions whenever possible to reduce its operating costs connected to the design, development, and manufacture of its products. One example is the company’s recent decision to produce 3G equipment at its Oragadam facility near Chennai, India, by May 2010.

NSN also apparently is following the Cisco model of seeking “market adjacencies,” though I’m not sure the German-Finnish joint venture would use the same terminology. NSN said Monday that its telecommunications expertise gives it a mandate to offers solutions to partners and customers involved with renewable energy, intelligent power grids, and smart metering.

Said Juhani Hintikka, head of operations and business software at NSN:

“When you look at what is required to manage power grids, or to make full use of unpredictable renewable energy sources such as solar and wind, as well as bring greater transparency to and flexibility to billing, the synergies with the core of our existing telecoms business are obvious.”

As of January 2010, NSN will be restructured from five business units into three: Business Solutions, Network Systems, and Global Services. Efforts related to renewable energy and energy efficiency will be folded into Business Solutions.

The company, in the midst of shedding as many as 5,800 jobs by 2011 — presumably to become leaner and meaner in its quest for increased market share — says its primary business focus remains the telecommunications industry. Like Cisco and others, however, it is looking to enter related growth markets with its products, services, and technologies.

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Cisco Extends Offer Period for Tandberg Shares

Reuters and others are reporting that Cisco today extended its offer period for shares of Tandberg, the Norwegian video-conferencing company, by two days, to December 3.

Cisco’s terms and conditions relating to the bid will remain unchanged, which means at least 90 percent of Tandberg’s shares must be tendered at the offer price of 170 Norwegian crowns per share.

In a statement, Cisco said the following:

“Soon after expiration of the extended offer period, Cisco will announce whether the 90 percent condition for the offer has been met.”

The consensus view is that Cisco is very close to having the required support from Tandberg shareholders, but that it needed a bit more time to solicit the share tenders that will put it over the top.

Murdoch’s Howler

You never can tell what strange verbal formulations will emanate from the mouths of babes or wizened, septuagenarian media magnates.

Rupert Murdoch, chairman and CEO of media empire News Corp., today told a Federal Trade Commission (FTC) workshop on the state of journalism that media organizations, if they are to thrive in the digital age, must persuade consumers to pay for news content online.

In of itself, that pronouncement might not rate as particularly newsworthy. We know that news-media organizations must adapt their business models to endure in an age of digital distribution, though there’s some debate as to whether that should be done primarily through online advertising or through subscription-based, reader-pay models. In my view, tapped-out consumers already pay to get on the Internet, and they will be passionately disinclined to cough up content tolls to every online publisher with an outstretched hand.

Murdoch’s howler, though, came in his justification for seeking money directly from his readers rather than from advertisers. The Australian media baron said online publishers must charge for their content because “good journalism is an expensive commodity.”

I consider myself a tolerant soul, but I must call bullshit when I see it. Good journalism? From News Corp? This coming from the philistines who bring us the UK’s Sun and News of the World, not to mention the New York Post? From the man whose publishing empire cheapened the UK’s Times and has rubbished the quality of the Wall Street Journal?

To paraphrase Martin Amis from his novel “Money”: Are Rupert’s publications, online or otherwise, any way to interpret the world?

Cripes, Rupert, why not just admit you’re a greedy sod who wants more money? That would at least have the virtue of honesty, and a certain twisted integrity. Don’t justify your grasping for our coin on the basis of “quality journalism.” You wouldn’t know good journalism if it hit you in the head in the form of a rolled-up newspaper — maybe a copy of the Wall Street Journal before you desecrated it.

Deadline Day for Tandberg Shareholders to Accept Cisco’s Enhanced Offer

As Reuters noted yesterday, today is the deadline for shareholders of Norwegian video-conferencing system vendor Tandberg to accept Cisco’s revised (as in increased) takeover offer.

I expect the modified proposal to receive the necessary backing from Tandberg shareholders, but the proof will be in the pudding — or whatever après-acquisition dessert they favor in Norway.

China as Global Market Mover

As the global economy realigns along unfamiliar coordinates, it’s fascinating to observe some of the changes occurring in real time.

For as long as most of us can recall, the US economy was the world’s primary economic driver. Americans consumed prodigiously, and the rest of the world catered to the voracious appetite. At the same time, American treasuries were being bought by the same economies — such as China and the oil-producing jurisdictions of the world — that exported goods to the USA. The exporting nations supported US debt as long as US consumption could keep the global party hopping.

Parties, though, often end with their most passionate participants nursing debilitating hangovers.

The system worked well until it stopped working. The government and people of the USA got overleveraged, and now deleveraging is ensuing even as the world looks for new markets to function as consumers of last recourse. The transition will not happen overnight; it will take time. There will be hiccups, and probably worse, along the way.

Increasingly, though, China is emerging as a key consumer, taking weight from the slumped shoulders of financially enervated Americans. This is a positive development, because the world needs buyers as well as sellers for its goods and services. If Americans will consume less, then somebody must step up to consume more. Slowly but surely, China is growing into that unfamiliar role.

How can you tell? Look at what happens in the world’s markets each and every day. Foreign bourses now take their cues as much from Shanghai as from Wall Street. Oil prices rise and fall as much on demand signals from China as from the United States. The stock prices of manufacturers of heavy machinery, automobiles, airplanes, and technology products and services increase or decrease on the relative strength of Chinese demand.

The economies of the world are going through enormous changes. It isn’t business as usual anymore, including in the information-technology industry. It’s time to reassess all our assumptions about how the world works.

Lenovo Buys Back Lenovo Mobile to Reenter Chinese Handset Market

Lenovo is getting back into the mobile-phone business in China, according to the Wall Street Journal. One has to wonder whether that was the plan all along.

In 2008, Lenovo withdrew from the handset market, selling Lenovo Mobile for $100 million to group of investors led by Lenovo Holdings Ltd., the private equity arm of Lenovo’s parent, Legend Holdings Ltd. Back then, the rationale for the divestiture was that Lenovo wanted to place singular emphasis on its execution in the personal-computer business.

Then and now, though, Lenovo had to realize that the handset market in China would be a fast-growing, potentially lucrative market for many years to come. Run as a separate entity, Lenovo Mobile prospered, now ranking third by unit shipments in China’s mobile-handset market.

What’s more, Lenovo Mobile apparently got its financial house in order after leaving the official Lenovo fold. That’s one of the reasons Lenovo has decided to buy it back with for $200 million in cash and shares sourced from “internal resources.” The main reason, of course, is that the Chinese cell-phone market is an ever better place to be now than it was in 2008, which — even for the those afflicted with attention-deficit disorder — wasn’t that long ago.

Lenovo has a prototype mobile Internet device (MID) in the works, and Lenovo-branded handsets will be released shortly. Again, it makes one wonder whether the spin-out-to-spin-in strategy wasn’t in the playbook from the outset.