Like That Little Engine, Nokia Siemens Thinks It Can Make It

engineimage-300x277Nokia Siemens, a telecommunications equipment joint venture, plans to lay off up to 5,700 employees, or 7-9 percent of its work force, in order to cut about $740 million in costs. The company, which is a joint venture between Siemens (s si) and cell phone maker Nokia (s nok), will also whittle down to three business units from five. But you wouldn’t really get it after reading the headline on its press release which states, “Nokia Siemens Networks Targets Improved Financial Performance, Return to Growth.”
Look, I get that you probably don’t want to title your press release, “We’re Laying off 5,700 Workers,” but the headline chosen is too divorced from reality for my tastes. Emphasize the positive by all means, but the title amounts to wishful thinking, especially given the incredible difficulties the entire telecommunication equipment market faces. Remember Nortel (s nt)? Like that “Little Engine that Could,” Nokia Siemens may think it can, but this isn’t a children’s story, and it might not have a happy ending.
With intense competition coming from European competitors Alcatel-Lucent (s alu) and Ericsson (s eric) and even more fierce rivalry from the upstart Asian vendors, Huawei, and ZTE, selling telecom equipment is getting more cutthroat. The company is dragging down its backers, with Nokia marking down $1.4 billion of its investment in the joint venture during the most recent quarter, despite efforts a year ago to cut costs. Cutting costs is only going to take Nokia Siemens so far, and it’s not likely to get it over the hill into profitability and growth.