Nokia 2011 Annual Report Download - page 43

Nokia Siemens Networks
In addition to the risks described above, the following are risks primarily related to Nokia Siemens
Networks that could affect Nokia.
Nokia Siemens Networks’ new strategy to focus on mobile broadband and services and its
restructuring plan designed to improve financial performance and competitiveness may not
succeed in improving its overall competitiveness and profitability. Nokia Siemens Networks
may be unable to execute the strategy effectively and in a timely manner, and it may be unable
to otherwise continue to reduce operating expenses and other costs.
In November 2011, Nokia Siemens Networks announced a new strategy, including changes to its
organizational structure and an extensive global restructuring program, aimed at maintaining and
developing Nokia Siemens Networks’ position as one of the leaders in mobile broadband and services
and improving its competitiveness and profitability. Planned changes include the introduction of a new
business unit structure, the streamlining of certain central functions and a move to three customer
operations sales clusters from two.
The plan includes a target to reduce Nokia Siemens Networks annualized operating expenses and
production overheads, excluding special items and purchase price accounting related items, by EUR 1
billion by the end of 2013, compared to the end of 2011. Together with a range of productivity and
efficiency measures, Nokia Siemens Networks has targeted headcount reductions intended to align the
workforce with the company’s new strategy. Nokia Siemens Networks will also target areas such as
real estate, information technology, product and service procurement costs, overall general and
administrative expenses, and a significant reduction of suppliers in order to further lower costs and
improve quality.
As the communications market continues to undergo significant changes, Nokia Siemens Networks’
strategy to focus on mobile broadband infrastructure and services is subject to risks and uncertainties,
including:
• The market may develop in directions that leave Nokia Siemens Networks deficient in certain
technologies and industry areas that impact its overall competitiveness.
• Certain customers who currently buy services and products from Nokia Siemens Networks
that are not regarded as core may choose to turn to alternative vendors to maintain
end-to-end service from their suppliers.
• Developing and implementing the new strategy and restructuring plan has consumed and will
continue to consume significant time, attention, resources of management.
• Personnel reductions may result in reduced productivity and dissatisfaction and loss of morale
among employees and lead to loss of key personnel. These factors may have a more
pronounced adverse impact due to Nokia Siemens Networks’ prior restructuring measures.
Although Nokia Siemens Networks has not experienced strikes in the past, it may face labor
unrest, strikes or work stoppages as a result of increased dissatisfaction among its employees
resulting from the ongoing and past restructuring measures.
• There can be greater than expected difficulties from legal, regulatory or other matters that limit
Nokia Siemens Networks’ ability to implement the restructuring as planned or affecting the
associated costs.
• If Nokia Siemens Networks fails to implement its new strategy and restructuring plan
successfully or to otherwise reduce its operating expenses and other costs on an ongoing
basis, its market share may decline which could result in the loss of scale benefits and reduce
competitiveness and its financial performance may deteriorate.
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