Nokia 2009 Annual Report Download - page 31

Nokia Siemens Networks
In addition to the risks described above, the following are risks primarily related to Nokia Siemens
Networks that could affect Nokia.
In response to its declined market share and deteriorated financial performance, Nokia
Siemens Networks announced in 2009 a plan to improve its financial performance by reducing
operating expenses and other costs and increasing profitability. If Nokia Siemens Networks is
unable to execute its plan effectively and timely or if the plan fails to achieve the desired
results, that may have a material adverse effect on our business, results of operations and
financial condition.
The market share and financial performance of Nokia Siemens Networks deteriorated in 2009 and the
competitive environment in the mobile and fixed network infrastructure and related services market
continued to be intense. In response to this, Nokia Siemens Networks announced in November 2009 a
plan to improve its financial performance and increase its profitability. The plan includes a
reorganization of the company’s business units to provide a more customerfocused structure, as well
as extensive operating expense, production overhead and procurement cost reductions. The plan also
includes a global personnel review with possible reductions.
Executing this plan may consume significant time, attention and resources of Nokia Siemens
Networks’ management which could harm its business. Nokia Siemens Networks customers may be
more intensively targeted by competitors during the plan implementation period. Further, the
possible personnel reductions may result in reduced productivity and dissatisfaction among
employees and lead to loss of key personnel. These factors may have a more pronounced adverse
impact due to Nokia Siemens Networks having been subject to various restructuring measures in the
past. If Nokia Siemens Networks fails to execute its plan successfully, its market share may decline
further which could result in the loss of scale benefits and reduce its competitiveness and its financial
performance may deteriorate further. See Item 4B. “Business Overview—Nokia Siemens Networks—
Overview” and Item 5A. “Operating and Financial Review and Prospects—Operating Results—Principal
Factors and Trends Affecting our Results of Operations—Nokia Siemens Networks” for more details.
As part of its strategy to increase its competitiveness Nokia Siemens Networks has expanded its
enterprise mobility infrastructure as well as its managed services, systems integration and consulting
businesses through acquisitions and collaborative arrangements, such as partnering with third
parties. Nokia Siemens Networks expects to make further investments in these areas in a focused
manner. If Nokia Siemens Networks fails to increase its competitiveness through these and other
measures or if there is a further deterioration of Nokia Siemens Networks financial performance, this
may have a material adverse effect on our business, results of operations and financial condition, and
we may need to make further impairment charges.
Nokia Siemens Networks is a company jointly owned by Nokia and Siemens and consolidated by
Nokia. Accordingly, the financial performance of Nokia Siemens Networks, including the announced
measures targeted to improve it, may also require further support from the shareholders of Nokia
Siemens Networks in the form of additional financing, guarantees, consents or agreements by the
shareholders regarding measures planned by its management, or through other means. If Nokia
Siemens Networks fails to achieve such support from its shareholders, our business, results of
operations and financial condition could be materially adversely affected.
The networks infrastructure and related services business relies on a limited number of
customers and large multiyear contracts. Unfavorable developments under such a contract or
in relation to a major customer may have a material adverse effect on our business, results of
operations and financial condition.
Large multiyear contracts, which are typical in the networks infrastructure and related services
business, include a risk that the timing of sales and results of operations associated with those
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