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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