Given the unexpected and precipitous drop in Nokia Siemens Networks' revenue and profits last month, it came as no surprise that parent company Nokia on Tuesday announced sweeping revamping and cost cutting of the networking unit that will result in layoffs of up to 5,700 workers globally. The new plan seeks to cut annual costs by $740 million.

The revamping, which entails collapsing Nokia Siemens' existing five business units into three, came after Nokia reported a loss of $836 million in its third quarter. The Nokia Siemens unit, cobbled together in 2007 after a series of corruption scandals in the Siemens operation, has suffered along with most other large telecom infrastructure companies.

The reorganization was announced by the unit's CEO Rajeev Suri, who took over leadership last month. In a statement, Suri said, "As our customers make purchasing decisions, they want a partner who engages in issues well beyond traditional discussions of technology. Business models, innovation growth, and transformation are now very much front and center when it comes to the selection of a technology partner -- and our planned new structure will position us well in this changing market."

The new business units will consist of customer-oriented Business Solutions, which will be led by Jurgen Walter; fixed and mobile infrastructure supplier Network Systems, to be led by Marc Rouanne; and outsourcing, services, and support provider Global Services, to be led by Ashish Chowdhary.

Nokia Siemens Networks submitted bids for some operations of bankrupt Nortel Networks, including its LTE/CDMA operation, but eventually lost out to Ericsson, which paid $1.3 billion for the unit. In spite of losing the auction, Nokia Siemens has a strong presence in LTE, the emerging next generation of wireless infrastructure.

With Nortel gone as a competitor, Nokia Siemens will likely face competition from Ericsson and Alcatel Lucent, both of which underwent their own reorganizations earlier in the decade.

In spite of planning downsizing in workforce and production overhead, Nokia Siemens said it will seek to beef up its business through partnerships and acquisitions. It noted that it has a strong partnership already with Juniper Networks in carrier Ethernet.

"We recognize that we are operating in a market where customer needs are evolving fast," said Mika Vehvilainen, chief operating officer, in a statement. "We see acquisitions and expanded partnering as important tools to help meet these needs in the fastest, most efficient way possible."

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