Light Reading

Nokia Cuts 10,000 Jobs, Restructures

Ray Le Maistre
LR Mobile News Analysis
Ray Le Maistre, Editor-in-chief
6/14/2012
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Nokia Corp. (NYSE: NOK) has unveiled a major restructuring process in an effort to become a profitable and more relevant company.

The Finnish mobile company, which recently lost its long-held position as the world's leading device maker to Samsung Corp. , has been struggling in the face of competition from the Android-based smartphone vendors, Apple Inc. (Nasdaq: AAPL) and a new wave of low-cost feature-phone players, reported a massive loss for the first three months of this year and is the subject of much speculation about its future. (See Euronews: Takeover Rumors Lift Nokia, Nokia Loses Its Mobile Crown and Nokia Loses More Than €1.57B.)

With the second quarter's performance looking dire, CEO Stephen Elop has decided to take drastic measures in order to survive the onslaught, though his tactics and the outlook for the next few quarters have sent investors running to the hills -- Nokia's share price is down 11 percent to €1.98 Thursday morning on the Helsinki stock exchange.

Here are the key details announced early Thursday.

  • Nokia is to cut up to 10,000 jobs worldwide by the end of 2013. As part of this it will shrink its IT, corporate and support functions. In February the company announced the loss of 4,000 jobs. (See Nokia Cuts 4,000 More Jobs .)

  • Certain R&D projects will be reduced, resulting in the closure of research facilities in Ulm, Germany, and Burnaby, Canada.

  • Manufacturing operations will be further consolidated, resulting in the closure of facilities in Salo, Finland. R&D operations will continue in Salo.

  • None-core assets will be shrunk, closed or sold. As part of this process, Nokia has agreed to sell a majority stake in its luxury mobile phone unit, Vertu , to private equity firm EQT VI for an undisclosed sum. Nokia will retain a 10 percent stake in Vertu, which is based in the U.K. and employs about 1,000 staff.

  • The cost-cutting measures, which will result in €1 billion (US$1.26 billion) of restructuring charges, should help the company reduce its annual operating expenses (excluding one-time charges such as restructuring costs) at its Devices & Services (smartphones and feature phones) line of business by €1.6 billion ($2 billion), leaving its annual operating expenses run rate at €3 billion ($3.77 billion) by the end of 2013.

  • The company has promoted internally to create a new senior team (from July 1): Juha Putkiranta will be executive vice president of Operations; Timo Toikkanen will replace outgoing Mary McDowell as executive vice president of Mobile Phones; Chris Weber will be executive vice president of Sales and Marketing; Tuula Rytila becomes senior vice president of Marketing and chief marketing officer, replacing current CMO Jerri DeVard, who is leaving the company; and Susan Sheehan will be senior vice president of Communications. In addition, executive vice president of Markets, Niklas Savander, is leaving the company. In April, Nokia announced that global sales leader Colin Giles was leaving on June 30. (See Nokia Streamlines Sales Management.)

  • Nokia's smartphone sales are shaping up to be worse than expected during the second quarter, which closes June 30, while "competitive industry dynamics" are set to make the third quarter a tough one too. The company now expects its Devices & Services second-quarter operating margin (before one-time costs) to be worse than the first quarter's negative 3 percent, compared with its previous expectation of recording an operating loss about the same as the first quarter's.

  • The company, which has three business units (Devices & Services, Location & Commerce, and Nokia Siemens Networks) believes the changes can reverse its fortunes and make it a growing, profitable company again. It intends to invest in its location-based services that can be integrated into its phones and focus its device developments on the Lumia range. As part of this strategy it has agreed to acquire Swedish imaging technology specialist Scalado for an undisclosed price, a move that will give it technology, intellectual property and development staff.

    CCS Insight analyst Ben Wood noted on Twitter that the resizing of the company is a "necessary evil" but that Nokia "can't keep cutting forever." He added that the purchase of Scalado is "astute… [a] great asset underlining Nokia is going big in imaging."

    Nokia has been having a tough time of late.



    — Ray Le Maistre, International Managing Editor, Light Reading

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    SReedy
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    SReedy,
    User Rank: Blogger
    12/5/2012 | 5:30:17 PM
    re: Nokia Cuts 10,000 Jobs, Restructures


    Wow, that's a lot of changes to take in. It's interesting that Nokia wants to compete on location more.  It has owned Navteq for awhile now, but has not done much with it. With Apple and Google's recent map-related announcements, that space is getting pretty interesting. 

    digits
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    digits,
    User Rank: Light Beer
    12/5/2012 | 5:30:15 PM
    re: Nokia Cuts 10,000 Jobs, Restructures


    It sees its location-based apps as a differentiator but will consumers view it that way?


    If Lumia doesn't capture more people's imaginations in the next 6 months then whether it has in-house service capabilities to integrate might become irrelevant.

    krishanguru143
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    krishanguru143,
    User Rank: Light Beer
    12/5/2012 | 5:30:14 PM
    re: Nokia Cuts 10,000 Jobs, Restructures




    There are two main cartography companies, Nokia owns one and TomTom the other.  So even though Apple released their new navigation app, it relies on the cartography from TomTom.

     

    Nokia needed to cut 10,001 jobs, not 10,000.  The "extra" one is none other than Elop himself. He put the company in the position it currently is in.  Sooner or later, the shareholders and the board need to accept the fact that Elop is not the person for the job.  WP7 is about as irrelevant as you can get in the mobile sector, so it is impossible to become relevant with an irrelevant product.

    Cutting 10,000 jobs is a drastic measure, but he said the same thing about transitioning to WP7.  How has that worked out?  One drastic measure now requires another.  NOK also is ever nearing the point of being delisted, all they need to lose is another ~$1.40 and then continue to close under $1.00 and a delisting will be a certainty unless Nokia can prove a turnaround is in the works.  Unless that turnaround involves dumping WP, I can’t see them staying listed as their current plans have failed miserably.




    Rush21120
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    Rush21120,
    User Rank: Light Sabre
    12/5/2012 | 5:30:14 PM
    re: Nokia Cuts 10,000 Jobs, Restructures


    For Nokia the train has already left the building for location-based services as that fight is now Google and Apple.  Catching either of them without clear distinction (and I don't know what that is for Nokia) will be next to impossible so best case they get overflow.  Nokia missed the train/boat many years ago. 


    As for promoting within thats great but unless these folks are visionaries and ones without the Noika view it won't help Nokia. 

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