Research Paper on Nokia Networks Turnaround

Introduction

All industries and markets often face disruption, which necessitates companies to adopt strategies that can effectively help deal with adverse business environments. For instance, Boston Consulting Group (BCG) research reported that a third of U.S. companies had experienced severe performance issues in the last two years (BCG.2017). Additionally, one in three firms is forecasted to cease existing in about five years, a number that is up from one in twenty 50 years ago. As such, for leadership teams, turning around an enterprise is the most accurate test of their performance. Unfortunately, leaders fall short of leading a successful turnaround. In fact, 75% of the major turnaround efforts usually do not achieve the expectations set regarding the target value, timing, or both (BCG, 2017). One of the companies that have made successful comebacks is Nokia Networks. The company is a multinational telecommunications equipment and data networking company that is headquartered in Espoo, Finland. It is a wholly owned subsidiary of the parent company, Nokia Corporation. The firm was founded in 2007 as a joint venture between Siemens of Germany and Nokia of Finland, referred to as Nokia Siemens Networks and has operations in about 120 countries. At the beginning of Nokia Network's turnaround, Nokia acquired 100% of Siemens' shares, and in 2014, Nokia Solutions and Networks (NSN) was phased out owing to the rebranding and repositioning process that characterized the turnaround. This was after Rajeev Suri was selected as the president and CEO of Nokia Networks on May 1, 2014. As such, Suri was the architect of the turnaround process. The current research endeavors to analyze Nokia Network's turnaround by obtaining primary data via interviewing the management team, as well as looking into secondary sources for more information pertaining to the growth and collapse of the company. As such, the purpose of the current paper is to identify the causes of Nokia Networks failure, the nature of the crisis the company faced and what actions the management took to turn the business around.

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Nokia Networks Journey to Turnaround

Nokia Siemens Networks (2007-2013)

Nokia Networks was formerly named as Nokia Siemens Networks (NSN) from 2007 to 2013, and Nokia Solutions and Networks (NSN) from 2013 to 2014. The CEO of Nokia Networks Suri from the very start implemented the Nokia way, with which he highlighted the core values of Nokia - client satisfaction, continuous learning, and respect for the individual (Alcacer et al., 2014). The newly founded company, which began its operations on April 1, 2007, defined its values and ethics, as well as a compliance program for the employees. In its introductory phase in 2007, the company showed its commitment to emerging markets and the expansion of research and development capacity in Chengdu, China coupled with an investment of USD 100 million for it to strengthen operations in India (Nokia Siemens Networks, 2007). The deals that were signed in India included a USD 500 million meant for network expansion contract with Idea Cellular, as well as a USD 900m network expansion with Bharti Airtel. As well as in China, a 180 million euros GSM and Edge deal with Henan MCC. Besides, NSN won a deal with Sprint Nextel, which made it an infrastructure provider for its 4G WiMAX network, as well as a deployment of I-HSPA solution with TerreStar. Besides, NSN also won an LTE trial deal with Verizon. Besides, the company was chosen along with NTT DoCoMo in Japan for its 3G LTE services. Also, by December 2007, NSN and Zain Saudi Arabia reached an agreement to supply 2G and 3G network equipment worth USD 935 million (Nokia Siemens Networks, 2007). By December 2007, the net sales were EUR 13,393, and the operating profit was a loos EUR 1,308. This was attributed to investments surpassing the sales (Nokia Annual Report, 2007.

The CEO led major investments in 2008. NSN launched its LTE solution for core and radio networks, including a new Flexi Multimode Base Station and by October started shipping Flexi base Stations that were LTE-compatible. NSN also secured major 3G radio access deals globally including UK, Indonesia, and Brazil (Nokia Siemens Networks, 2008). It also improved LTE to LTE-Advanced technology with a speed of 100 Gbps and a transmission of wavelength exceeding 1040 km. It also made a deal with Embarq Corporation in the US. In addition, the company achieved all EUR 2 billion of targeted annual cost synergies that were set by the end of 2008 Nokia Siemens Networks, 2008). In consequence, the net sales for 208 were EUR 15,309m with an operating loss of EUR 301m. As such, there was a significant improvement regarding net sales while at the same time reducing the operating loss.

In 2009, NSN won 29 new 3G contracts, which confirmed the industry-leading position of the company in the wireless broadband category. The firm secured deals worldwide, including with Telenor in Sweden and Denmark, Vinaphone and Viettel in Vietnam, China Mobile and China Unicom, Megafon in Russia, Nuevatel in Bolivia, Softbank in Japan, and Hutchison Telecom in Hong Kong (Nokia Siemens Networks, 2009). NSN also signed 37 new Managed Services contracts with various companies, such as Orange in the UK and also extended global services delivery by setting up a Global Networks Solutions Centre in India. It also advances its Flexi Multiradio base station that allowed for GSM/EDGE, WCDMA/HSPA/HSPA+ and LTE standardization (Nokia Siemens Networks, 2009). Besides, the firm announced a plan to reduce annualized operating expenses, as well as production overheads of EUR 500m by 2011 in comparison to the end of 2009 no non-IFRS accounting basis (Nokia Siemens Networks, 2009). Besides, it also sought to reduce personnel b about 9% of its 64,000 workers. However, the net sales dropped to EUR 12,574m fro, EUR 15,309m in 2008, signifying a percentage drop of 18%. Also, the operating losses also increased from EUR 301m in 2008 to EUR 1,639m in 2009. This means that the company was not doing well in terms of profits since the company was started in 2007.

In 2010, NSN continued to make significant progress in LTE technology and announced major LTE contracts, for example with TeliaSonera Sweden, Deutsche Telekom, Elisa, as well as with LightSquared in the US (Nokia Siemens Networks, 2010). It also settled on deals in emerging markets, such as a USD 700m network expansion with Bharti Airtel, as well as 3G deals with Tata Teleservices, Aircel, Vodafone Essar, and Idea Cellular. Additionally, the company also signed a ERR 750m agreement with China Unicom and China Mobile in a bid to continue offering WCDMA, TD-SCDMA, and GSM networking equipment and solutions (Nokia Siemens Networks, 2010). It also made major improvements for smart device solutions, better coverage, and faster download speeds, with O2 in London, SFR in France, Cell C in South Africa, Mosaic Telecom in the US, Indosat in Indonesia, Elisa in Finland, and Cable and Wireless Technologies in the UK. In fact, by the third quarter, NSN had made a critical step forward of achieving 400 Gbps (Nokia Siemens Networks, 2010). In consequence, the net sales improved by 1% from 2009 to EUR 12,661m, but there were operating losses amounting to EUR 686m, but an improvement of 58% from 2009. The 1% improvement was attributed to an offset of the competitive factors coupled with industry-wide shortages of certain network components. The gross profit, however, decreased to EUR 3,395m in 2010 in comparison to EUR 3,412m in 2009.

In the following year, November 2011, NSN announced the adoption of a new strategy, which included changes to organizational structures and a restructuring program that was aimed at making the enterprise an undisputed leader particularly in the mobile broadband and services, as well as improving the competitiveness and profitability of the company. Further, new LTE contracts were developed, including deals with STC Saudi Arabia (Nokia Siemens Networks, 2011). In the third quarter, NSN outlined is a vision to deliver broadband in the future via Liquid Net and also unveiled TD-LTE devices, and also established a joint venture with Micran in Tomsk, Russia, to build 4G LTE equipment.

In 2011, it was the beginning of the turnaround for Nokia Networks having acquired Motorola Solutions' wireless networking infrastructure assets in April (Nokia Siemens Networks, 2011). In consequence, as well as the improvements made between 2007 and 2010, the net sales improved by 11% from 2010 to reach EUR 14,041m. The gross profit also improved by 12% to reach EUR 3,802m. Overall, there was an operating loss, but the loss reduced significantly by 56% to reach EUR 300m.

The company had fallen far as it was an innovator in the earliest days of the broadband networks. It's flexible and fast response to the shifting markets, as well as its focus on engineering and design innovation had earned Nokia dominating lead in the provision of broadband networks. In fact, the CEO Stephen Elop in 2011 compared the position of Nokia to a man on a burning platform above icy ocean waters. The total market share for Nokia had dropped by 75% between 2007 and 2012. To survive the threat, the then CEO, Elop, asserted that Nokia needed to take a brave and bold move into an uncertain future. Soon after, Elop went ahead and made a major announcement that Nokia would stop its in-house operating system (OS), which was known as Symbian, in favor of Microsoft Corporation's Windows Mobile OS. The move was not enough, and clearly, it did not work as in 2012, the corporation made an operating loss of 2.3 billion euros and ceased being a top handset manufacturer, a position that was taken by Samsung (Alcacer et al., 2014). This led to Nokia Devices and Services being sold to Microsoft a year later, which presumably marked an end of Nokia's era as a handset manufacturer. The question at the time was what went wrong, what missteps that Nokia took over the years and whether the company would recover.

Nokia Solutions and Networks (NSN) from 3013 to 2014

In 2013, Nokia completed the acquisition of Siemens, and subsequently remand the business to Nokia Solutions and Networks (NSN). Also, the company won LTE contracts for Chin Telecom's and China Mobile's countrywide TD-LTE networks, as well as other countries, including SFR in Paris, Tele2 in the Netherlands, and Ooredoo in Qatar. The company continued to stay at the forefront of the mobile broadband by enhancing Radio Base Station Schedule and also launched TD-LTE Base Station radio module. Also, it enabled the airing of the first world TV broadcast via TD-LTE. NSN also helped Korean operators, LG U+, SK Telecom, and Korea Telecom to become world's first in launching LTE-Advanced commercial services. NSN and South Korea's SK Telecom completed the first proof-of-concept of Liquid Applications over LTE, and thus, NSN demonstrated its telco cloud abilities as a joint proof of concept for Evolved Pocket Core (EPC) virtualization with SK Telecom. Regarding Net sales, they dropped by 18% from EUR 13,779 in 2013 to EUR 11,282m in 2013. In addition, the gross profit fell by 1% from EUR 4,169m in 2012 to EUR 4,134m in 2013. However, for the first time, it made an operating profit of EUR 420m in 2013 from a loss of EUR 795 in 2012. This was a major turnaround regarding operating profits, meaning that the business was increasingly becoming more profitable.

Nokia Networks (Since 2014)

NSN rebranded to Nokia Networks in 2014 and became the largest of Nokia Corporation's businesses. It was ranked third in regards to market share in mobile radio networks and telecommunication services and had about 54,600 employees in 120 countries. In 2014, Nokia Networks acquired Mesaplexx Pty Ltd, with inclusion of its high performance and...