14,000 jobs to go at Nokia as cost pressures bite
Represents 17% of the workforce
Finnish telecom equipment maker Nokia has announced it will cut up to 14,000 jobs globally over the next two years, representing about 17% of its workforce.
The move comes as Nokia struggles with a slower market recovery than anticipated despite growth in 5G, AI and other emerging technologies. However, the timing of broader 5G adoption remains uncertain. Rising inflation has also led to higher costs for Nokia.
"Nokia expects to act quickly on the programme with at least €400 million of in-year savings in 2024 and a further €300 million in 2025. The programme is expected to lead to a 72,000 - 77,000 employee organisation compared to the 86,000 employees Nokia has today," the company says in an interim Q3 report [pdf].
In a statement, Nokia CEO Pekka Lundmark said: "We continue to believe in the mid to long term attractiveness of our markets. Cloud computing and AI revolutions will not materialise 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."
Lundmark outlined plans to give Nokia's business groups more autonomy, embed sales teams into business groups, and reduce costs to "protect profitability." The company aims to cut its cost base by €800-€1,200 million by the end of 2026.
The job cuts will primarily affect Nokia's Mobile Networks and Cloud & Network Services divisions and corporate functions.
Nokia has faced stiff competition from Ericsson and Huawei in the 5G equipment market. While Nokia maintains significant market share, its 5G margins have suffered.
The company has invested heavily in 5G and related research and development areas. But the slower than expected rollout has hit returns on that investment. Foreign exchange fluctuations and inflation were also mentioned as factors behind the disappointing financial performance.
Reported operating profit in Q3 2023 was €241 million, or 4.8% of net sales, down from 8.3% in the same quarter in 2022.
Nokia says it remains confident in the long-term outlook for its markets, but needs to strengthen its financial position amid economic uncertainty to make it more competitive long term.
"In the last three years we have invested heavily to strengthen our technology leadership across the business giving us a firm foundation to weather this period of market weakness," said Lundmark.