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Nokia Siemens Networks launches with lowered expectations

The new joint venture known as Nokia Siemens Networks officially began operations yesterday, April 1, but it didn’t want to fool anyone: growth in the networks sector will be “very slight” this year, the company said.
The new company announced it will begin life as a major player with the objective of becoming the top infrastructure vendor-but in the last of nine paragraphs extolling its potential, the company dampened short-term expectations.
“Over the past couple of months, there has been a narrowing of visibility and indications of a slowdown in spending in some regions,” according to the company’s press release. “We now expect very slight market growth for the mobile and fixed infrastructure and related services market. Previously, Nokia expected slight growth.”
Clearly, moving from “slight growth” to “very slight growth” is a lowering of expectations. A set of Citigroup analysts cited by MarketWatch said that “very slight growth” could mean 1 percent to 2 percent growth.
Shares of Nokia Inc. and Siemens AG traded down on the news, as did shares of other infrastructure vendors such as Alcatel-Lucent and Nortel Networks Ltd.
The Nokia-Siemens tie-up was the latest to launch in the infrastructure field, following the Alcatel-Lucent match and Ericsson’s joint efforts with Marconi. The Nokia-Siemens JV was delayed as investigators plumbed Siemens for improprieties involving illegal payments to customers to win contracts.
The fundamental reason cited by the participants for the infrastructure industry match-ups has been achieving scale and cost savings in order to compete for a shrinking number of network contracts.


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