Nokia Corp. (NYSE: NOK) has replaced three senior executives, including the head of its mobile phone division. And it plans to reduce payroll by up to 10,000 as it struggles to restore profitability and improve its competitive position against companies like Apple Inc. (Nasdaq: AAPL) and Samsung Electronics Co. Ltd. (Korea: SEC).
In a press release today, Nokia announced the appointment of Juha Putkiranta as head of operations, Chris Weber as vice president of sales and marketing, and Timo Toikkanen as head of the mobile phone division, replacing Mary McDowell. The company also announced the departure of Jerri DeVard, its head of marketing, and Niklas Savander, its executive vice president of markets.
Nokia has been restructuring operations for more than a year as it has lost wireless handset marketshare. The losses deepened as consumers flocked to smartphones, abandoning the plain feature phones that helped to make Nokia the market leader. It has since lost that position to Samsung, and it posted four consecutive quarters of net losses starting in the first quarter of 2011. The losses have been compounded by one-time charges associated with the restructuring.
"We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services," Stephen Elop, president and CEO of Nokia, said in the release. "However, we must reshape our operating model and ensure that we create a structure that can support our competitive ambitions."
The latest reorganization will result in the closing of facilities in Canada and Germany, along with other steps to reduce its factory footprint. "These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength," Elop said.
The company also announced the sale of its luxury phone business today to the European private equity firm EQT VI, and it said it "will closely assess the future of certain non-core assets." Nokia expects to cut operating expenses in the devices and services business to €3 billion (approximately $3.8 billion) by 2013 from €5.35 billion ($6.7 billion) in 2010. The company said it has recorded savings of €700 million as of the end of the first quarter and is seeking about €1.6 billion of additional cost cuts by the end of next year.
Here are further changes planned by Nokia:
Reductions within certain research and development projects, resulting in the planned closure of its facilities in Ulm, Germany and Burnaby, Canada;
Consolidation of certain manufacturing operations, resulting in the planned closure of its manufacturing facility in Salo, Finland. Research and Development efforts in Salo to continue;
Focusing of marketing and sales activities, including prioritizing key markets;
Streamlining of IT, corporate and support functions; and
Reductions related to non-core assets, including possible divestments.
Hmmm! It is sad seeing this giant phone icon wallowing in doldrums of smartphone market. Why is Nokia unable to produce competitive phone? Why are the likes of iPhone and Samsung ( Android ) perhaps remain "best" in the eyes of mobile phone users? Why Windows OS based phone unpopular in the world in contrast to Windows OS for desktop computer ( XP, Vista, or 7).
No matter what, i think Nokia needs total overhaul in design strategy and proactiveness within its research and development center where ever it is located.
@Prabhakar, Nokia and RIM have indeed been cutting costs as a way to get themselves profitable. That's an error so many companies commit. They cut costs to match current sales. The dumbest executive can put those numbers together and say: "if my cost is currently greater than my sales, I should bring down my costs below my sales and I'd be profitable." Brilliant, eh? Not.
That's the step dummy leaders would consider first. Great leaders on the other hand would look at the employee resources they have and evaluate them on quality and usefulness. Then they'll look at the products they want to have and envision a customer base that can't do without those products. Then they'll charge the employees with creating that product. In other words, executives that are outstanding would aim for higher sales rather than merely start cutting costs.
They would say something along the lines of: 1. Our costs are greater than our revenue. 2. Let's grow our revenue to be above our costs. 3. Let's keep innovating products and services that keep our revenue way higher than our costs. Anything other than this is pedestrian and we see examples of this at Nokia and RIM.
Wale, Nokia CEO Elop was talking about systems and procedures. That's not what Apple won with. It won with great products that emerged out of a great system. Processes and systems are fine but Nokia hasn't given the market a product to look forward to. He is selling hope and that's not a product.
What are we waiting to see? Nokia is sliding downhill and it hasn't touched rock bottom yet. Once it does, visionary leadership -- if one comes along -- will get it back on the road up the mountain.
Nokia had its moment in the sun. A different company is shinning now and the reality is that Apple is the one with the golden touch at the moment. It lost its luster some years ago and found it again. Inevitably, it will lose it again and a competing business will be the new whizz kid. Only a few companies have the capability to keep renewing themselves and Nokia is in my opinion one of those companies. The problem is the leadership it currently has do not have the required vision.
"Could this be the end of Nokia?" @Anna, a big question you raised here.
According Nokia's CEO release "However, we must reshape our operating model and ensure that we create a structure that can support our competitive ambitions." Base on the CEO's statement, I think we just have to wait and watch as the smartphone market's drama unfolding. May be 1st quarter of 2013.
Just a couple of months ago, you had identified HP, Nokia and RIM to be lacking right directions and likely to go downhill because of their mis-strategies , not innovating early enough and be complacent about their market positions.
How true! All these companies are now struggling to keep themselves afloat.
@Wale I don't think that when a business lays off that many people that they're seeking to divert the money into research and development. Rather, I think that they want the savings in operations and labor cost to make their bottom line look better. It's possible they will divert some of the savings into investment in r & d, but there already should be a budget for that.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
To save this item to your list of favorite EBN content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This