HELSINKI (Reuters) - Struggling mobile network equipment maker Nokia Siemens Networks (NSN) has dumped its aggressive growth strategy to focus on profits as it embarks on a massive restructuring plan, its chairman said on Wednesday.
Jesper Ovesen, in his first interview since taking over from Olli-Pekka Kallasvuo four months ago, told Reuters that being more selective on deals could impact market share but that was a risk worth taking.
“Market share is not a key parameter for me. I cannot make a living out of market share,” he said.
“We are going into seriously managing profitability.”
NSN, which said in November it would cut 17,000 jobs or almost a quarter of its workforce to save about 1 billion euros ($1.31 billion), has posted huge losses since it was formed in 2007 by Nokia and Siemens.
Aggressive pricing from rivals like industry leader Ericsson and, increasingly, Chinese entrants as well as consolidation within its client community has triggered cut-throat competition.
“We cannot afford to burn 500 million euros a year in net cash. That’s what this company has done for five years,” Ovesen said.
“Even strong shareholders with deep pockets cannot continue to add money to a company which continues to lose it.”
Switching focus from market share could hand business to rivals but Ovesen said aggressive price battles were likely to continue.
“It is difficult to change. The bargaining power right now is sitting very much with the customers who are consolidating - through network sharing, through procurement sharing,” he said.
“If (customers) start to consolidate, as they are talking now, then perhaps there are 1-2 players too many.”
Ovesen, who helped turn struggling Lego around during his spell as CFO in 2003-2007, drew parallels with the toy group: both lacked focus and lost money despite strong products.
“NSN has strong technology,” but needed to turn it into a money-making enterprise.
Ovesen said no further injections of capital was needed to finance the restructuring.
“We are generating a lot of cash in Q4 and here in Q1, coming out of balance sheet and other places,” he said.
“I don’t think the parents should contribute more and they deserve to get a proper return now.”
Siemens and Nokia have both said they want to make the venture more independent and see a listing as one option within a few years.
Ovesen said the firm would need to complete the restructuring, demonstrate financial stability and remain a technology leader to enter the equity market.
“I have a mandate to restructure the company. Both shareholders know that if we are successful in this we build a lot of value for them,” Ovesen said.
“I think they have the patience to wait through to stage two in 2013 as long as we show the right progress to them and also build value here.”
Editing by David Cowell