A tremor of restructuring is rippling through the infrastructure players, signaling a new approach to the market. Such moves, some of them imposed and others induced, are spawning a new round of layoffs in some of the companies. Nortel Networks Ltd. and Motorola Inc. each announced job cuts.
Nortel said its anticipated restructuring will lap up 1,400 jobs in the United States, and the job overhaul will generate charges of about $450 million. In the breakdown of Nortel’s job cuts, its Canadian operations will lose 950 jobs, Europe, Middle East and Africa will give up 650 positions and other places will shed 250 workers.
With a view to focusing on its wireless business, Motorola said it plans to slash 1,000 jobs, or 1 percent of its staff, and absorb charges of about $50 million.
Most of the job losses will affect Motorola’s government, industrial, broadband and electronics systems units. The job losses also arise from the spinoff of chip subsidiary Freescale Semiconductor Inc., which will still generate more costs in the third quarter, according to Motorola. Also in the third quarter, the telecom player expects to incur $80 million in costs related to early debt repayments.
Analyst Hershel Shosteck said the layoffs did not indicate any failings in Motorola’s business or technology, but were the result of its chip spinoff.
“I would take the announcement on face value,” said Shosteck.
Nortel had announced plans earlier this month to cut jobs as it undergoes a financial review because of possible accounting problems. It also pared down its financial estimates for the third quarter. Nortel put off the release of its next quarterly results to the end of October. The company also reorganized its business to reflect the convergence of its mobile and wireline businesses.
“The decisions made to reduce our employee community and refine operational efficiencies have been undertaken in a very considered way,” said Bill Owens, president and chief executive officer at Nortel, adding the “plan demonstrates our commitment to `costs, cash and revenues’ as strategic imperatives in managing our business and driving growth.”
The telecom giant said the cuts will result in ongoing reductions in research and development expenses, selling, general and administrative expenses, and costs of sales.
About two-thirds of the affected employees will be notified by Dec. 31 and the remainder by June 30.
Nortel said it anticipates cost savings from the work plan of about $500 million in 2005 and expects to reduce its operating expenses to 35 percent of revenues or lower next year.
The vendor believes the work plan will lead to a smaller workspace, which will also lead to reduced expenses.
Meanwhile, Siemens AG began operating its new communications group, which combines its fixed and mobile communications units, following a trend in the industry. Siemens Communications Group will cover operations in more than 160 countries, according to the German vendor.
The business will be sub-divided into three segments under the leadership of Lothar Pauly, who will serve as group president. The three segments include carrier networks, enterprise networks and devices. A total of eight divisions will be created under the three segments, three for carrier networks, three for devices and two for enterprise networks.
Pauly will also head the fixed and mobile networks in the carrier segment in addition to being group president. Michael Kutschenreuter will be in charge of finances, Anton Hendrik Schaaf will be the chief technology officer as well as overseeing the group’s carrier business services. Andy W. Mattes will be responsible for enterprise business, while Thoste Heins will head the devices unit.
“Siemens Communications has a clear, two-pronged strategy,” explained Pauly. “First, we plan to expand our established business toward end-to-end solutions, from the core network to devices. Second, we will be consolidating our role as a trendsetter in convergence solutions for fixed and mobile networks, public and private networks, and multifunctional devices.”
