Nokia to erase up to 14,000 employees from payroll
Profits plunge, sales down in Q3. Multi-year cost cutting drive means staff will be decimated
Nokia, one of the world's largest telecommunications kit makers, is erasing up to 14,000 jobs after a plunge in net profit was caused by jittery customers delaying spending amid a slowing economy and rising interest rates.
Days after Swedish rival Ericsson outlined its challenging trading conditions for calendar Q3 ended September 30, rival Nokia reported [PDF] sales for the same period of €4.982 billion ($5.25 billion), down a fifth year-on-year, and a bottom line of €133 million ($140.3 million), down 69 percent.
In a statement, Nokia president and CEO Pekka Lundmark said he is confident in the "mid-to-long term attractiveness of our market," but he is less than certain about the near future.
"Cloud computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities. However, given the uncertain timing of the market recovery, we are now taking decisive action on three levels: strategic, operational and cost."
The intent is to hack chunks out of expenses, reducing them by €800 million ($844 million) to €1.2 billion ($1.27 billion) over a three-year period, with the aim of realizing an operating margin of 14 percent by 2026.
This equates to a 10-15 percent reduction in personnel expenses. "The program is expected to lead to a 72 000 – 77 000 employee organization compared to the 86 000 employees Nokia has today," the company said.
The size of the total cuts will hinge on the way end user demand shapes up. The cost-cutting scheme is expected to provide saving on a net basis "but the magnitude will depend on inflation." The redundancies are expected to come from the Mobile Networks, Cloud, Network Services and corporate functions.
"The most difficult business decisions to make are the ones that impact our people. We have immensely talented employees at Nokia and we will support everyone that is affected by this process. Resetting the cost-base is a necessary step to adjust to market uncertainty and to secure our long-term profitability and competitiveness," said Lundmark.
Nokia also said it is trying to increase the autonomy of the leadership in its business groups, so they can speed up decisions that affect their "distinctive" markets.
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Nokia is one of the world's big three network equipment manufacturers, alongside Huawei and Ericsson. Lundmark said network infrastructure revenues shrank 14 percent "due to weaker spending impacting IP networks while Fixed Network was impacted by the same challenge combined with customer inventory digestion."
Of 5G shipments in the Mobile division, the CEO said he noticed "some moderation in the pace of 5G deployment in India which meant the growth there was no longer enough to offset the slowdown in North America." Cloud and Network Services were down just 2 percent.
Earlier this week, Ericsson reported a 10 percent decline in sales, again citing customer uncertainty. Ericsson has already pulled the plug on 8,500 people this year, about 8 percent of its workforce. ®