Nokia Plots Job Cuts Outside Europe

Finnish equipment maker Nokia is plotting layoffs outside Europe after announcing plans to cut more than 1,300 jobs in Finland, France and Germany in recent weeks. (See Nokia Targets 1,330 Job Cuts in Europe.)

Kristian Pullola, Nokia's chief financial officer, confirmed that job cuts would affect staff outside the European markets where it has already announced layoffs.

"In some countries you need to make more public statements and have negotiations with trade unions and employee representatives, and that is why you are hearing more about actions we are taking in Germany, France and Finland, but that does not mean we won't be progressing and executing on reductions in other parts of the world," he told Light Reading shortly after Nokia had published its fourth-quarter earnings report. "This is a global cost reduction program." (See Nokia CEO Warns of Sluggish 5G Growth in 2019.)

Nokia Corp. (NYSE: NOK) is trying to reduce annual costs by around €700 million ($797 million) over the next two years as it targets an operating profit margin of between 12% and 16% for the 2020 fiscal year, up from 9.7% in 2018. (See Nokia Warns of Job Cuts in €700M Shake-Up.)

Having grown through the acquisition of Alcatel-Lucent in 2016, Nokia employed about 102,000 people worldwide in 2017, including around 63,000 outside Europe.

Table 1: Nokia Headcount in 2017

Region Average number of employees
Finland 6,359
Other European countries 32,698
Middle East and Africa 3,954
China 17,829
Asia-Pacific 22,179
North America 14,910
Latin America 3,802
Total 101,731
Source: Nokia.

While it has not said how many jobs will disappear in total, Nokia aims to cut about €500 million ($574 million) in pure operating costs as it reduces headcount in central support functions and consolidates some activities.

"A lot of the reductions are in support functions where we want to leverage digitalization and improve processes and make how we operate more simple," said Pullola.

Salary data published by Nokia suggests around 8,000 jobs could be at risk from a €500 million ($574 million) program, although savings are also expected from reductions to the real-estate footprint and overhead costs.

Nokia is not alone among the big equipment vendors in taking steps to reduce headcount.

Swedish rival Ericsson AB (Nasdaq: ERIC) has cut its headcount by more than 16,000 workers in the past two years and had about 95,359 employees on its books at the end of December. (See Ericsson Hails First Annual Sales Growth Since 2013 as 5G Comes Calling.)

China's Huawei Technologies Co. Ltd. has also warned of forthcoming layoffs as various countries seek to exclude it from equipment markets because of security concerns. "In the coming years, the overall situation will probably not be as bright as imagined, we have to prepare for times of hardship … We also need to give up some mediocre employees and lower labor expenses," said Ren Zhengfei, Huawei's founder, according to an internal email seen by the Financial Times. (See Huawei Founder Warns of Job Cuts – Report.)

Yet to publish a detailed annual report for the 2018 fiscal year, Huawei had around 180,000 employees in 2017.

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While Ericsson appears to have ringfenced its R&D business from the savings program, and continued to recruit R&D specialists, Pullola says that cuts will also affect this part of Nokia's business to a limited extent.

"Yes, there are some reductions in R&D but mainly that is a shift of investment from legacy [activities] that will result in some cuts but also in our increasing investment in areas like 5G and future tech developments," he said.

Nokia's last earnings report shows that R&D spending across the entire business fell from €4.2 billion ($4.8 billion) in 2017 to around €4 billion ($4.6 billion) last year.

Ericsson's R&D spending rose over the same period, from 37.9 billion Swedish kronor ($4.2 billion) in 2017 to SEK38.9 billion ($4.3 billion) last year.

Both companies are dwarfed in this area by Huawei, which spent 89.7 billion Chinese yuan ($13.3 billion) on R&D expenses in 2017 but -- unlike Ericsson or Nokia -- maintains a large handset business in addition to its networks division.

— Iain Morris, International Editor, Light Reading

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