NSN investment ensures stability

Daryl Schoolar/Ovum
04/10/2011
News
Commentary

Operators looking to invest hundreds of millions or even billions of dollars into their networks want assurance their infrastructure partners will be around for the long haul. Unfortunately for Nokia Siemens Networks (NSN), at times there have been questions about its long-term stability.

The company, despite recent revenue growth, continues to struggle with profitability. Its parent companies, Nokia and Siemens, have even explored the possibility of changing the ownership structure by bringing in outside investors. However, this looks set to change.

Nokia and Siemens have made a substantial capital investment into NSN and appointed a new executive chairman. This demonstration of strategic support and financial commitment shows that both parents are solidly behind their offspring. In an industry where stability plays a big part in a company’s competitiveness, the commitment should help make NSN a stronger player, [which] is especially important as NSN goes out to sell its new network solution Liquid Net.

Fiscal strength of vendor partners is a key decision criterion for operators. Nortel provides a reminder of this. While [the firm] certainly had strong wireless infrastructure solutions, the financial instability around the company made it a non-starter for many operators. Although NSN’s financials are nowhere near as bad as Nortel’s were, profits remain elusive for NSN. Operating losses continue despite recent revenue growth. This, coupled with the parent companies looking at private equity funding, adversely impacted the NSN brand and undermined confidence among its customers.

Beyond just the cash infusion, the appointment of a new executive chairman, who has a history in change management as highlighted in statements by Nokia’s CEO and Siemens’ CFO…, shows ongoing commitment from Nokia and Siemens. The public commitment should help NSN reassure operators that the company has what it takes to remain a long-term partner.

The €1bn investment and a new executive chairman will make NSN a more stable company. However, it is NSN’s infrastructure portfolio that will play an important part in filling the order books. The company’s recently announced Liquid Net will play a role in that.

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