Nokia Cuts More, But Is It Enough?

{complink 3847|Nokia Corp.} said last week it was transferring more smartphone device assembly to its Asian factories, a move that will cut 4,000 jobs at plants in Europe and Mexico.

The stated reason won't surprise anyone working in the electronics sector: Get to market faster by being closer to suppliers.

“Shifting device assembly to Asia is targeted at improving our time to market. By working more closely with our suppliers, we believe that we will be able to introduce innovations into the market more quickly and ultimately be more competitive,” said Niklas Savander, Nokia executive vice president, markets, in a press release.

Nokia has had its share of troubles these last few quarters — some of which stem back to its partnership with Microsoft and the increased competition from other companies such as Apple, Samsung, and other Android-based handset makers. Clearly, the Finnish company has to trim even more costs and keep its operational budget in line. (See: Nok-Win a No-Win Combination.)

The cutbacks, which will hit manufacturing facilities in Finland, Hungary, and Mexico, brings total planned job cuts to more than 30,000 since Stephen Elop took the CEO spot in September 2010, cites Reuters. And it comes on the tail of bad earnings news: Fourth-quarter smartphone sales fell 31 percent from a year ago, and the company had “a steep loss” for the quarter, according to the wire report.

Ironically, perhaps, the headcount cut also overlaps with rumors about the splash Nokia wants to make at the big telecom show, the Mobile World Congress, later this month. According to several reports, including one from Pocketnow, Nokia could be introducing six devices — three smartphones (two Windows Phones and a Symbian) and three feature phones. One of them seems to be going after the high-end market, according to a Forbes post.

Leading up to last year's MWC, Elop laid out his plan for reviving Nokia and followed up with additional details in an Engadget video interview, with particular emphasis on how the company was going to build out its Microsoft relationship. The company didn't announce any new devices at the last year's conference, the annual main event for anyone who's anyone in the mobile space. (See: The Problem With Nokia.)

The plus side is that Nokia is still the undisputed king of the low-end handset range. Maybe, that's not such a bad thing — capturing the high-volume, low-end niche. There are still millions of people in Africa, Asia, and Latin America that rely on these kinds of phones.

As we all know, though, the money — and the margin — is in the smartphone business. Nokia's chance to get any significant portion of that market looks bleaker every month. We'll see what Elop has to say at this year's MWC show, starting Feb. 27.

19 comments on “Nokia Cuts More, But Is It Enough?

  1. Barbara Jorgensen
    February 15, 2012

    That's a staggering number–30,000 people cut. Worse still, many of those cuts are in the Eurozone. I'm never sure that cutbacks can cure the ills of a company that has clearly overlooked some important inflection points in its market. But as a publicly traded business, Nokia has to stem the bleeding. IS it enough? I really, really hope so.

  2. Nemos
    February 15, 2012

    “it was transferring more smartphone device assembly to its Asian factories, a move that will cut 4,000 jobs at plants in Europe and Mexico.” 

    Nokia chooses the wrong way or in other words, the way to its death. Nokia will lose its Base in Finland (because of the cuts), and that means that people will stop buying phones. Most of   Finns have connected the Company with the country, and they was pride about it, that leads to strong relations between the company and customers. However, now Nokia will move its factories to Asia this raises a doubt about that feeling.

  3. Cryptoman
    February 15, 2012

    Surely, Nokia's move will not be received well by the Finns. I agree that Nokia may even lose all its Finnish customer base. However, considering that Finland's population is less than 6M, this is a loss Nokia can afford to take. If we look at Nokia's mobile device sales last year, the reason for this becomes clearer.

    Q1 – 108.5M

    Q2 – 88.5M

    Q3 – 106.6M

    Q4 – 113.5M

  4. Daniel
    February 15, 2012

    Jennifer, Nokia is a Finland based country having strong base in their home land and Europe. But I don’t know why they are trying to focus their production units from Europe to Asian countries. If they are considering only the cost factor, for long term run it may not be feasible because now the manpower and raw material cost is at par with other European countries. Recently I had read a similar article from China that their labour cost is increasing at a rate of 20-35% every year.

  5. elctrnx_lyf
    February 16, 2012

    I think instead of concenting and wasting resources and money on transferrign the manufacturing to the low cost countries, it is important layout a right plan and strategy to gain more market share of the smart phoen market. I alos wonder why not a nokia tablet with windows. I expect this to be coming soon!!!

  6. prabhakar_deosthali
    February 16, 2012

    For a business – Survival & profit  comes first , the national pride the second. And Nokia makes majority of its sales in Asia. Here in India until last year Nokia was the no 1 brand that came to buyer's mind while doing a mobile purchase. With Samsung making a big entry with their smart phones Nokia has started lagging here.

    February 16, 2012

    It is a shame all those people are losing their jobs and to see a formerly great company like Nokia stuggling so much.  It goes to show that you need to innovate to survive these days.

  8. Nemos
    February 16, 2012

    'the national pride the second.” Yes, that is true but as I wrote the national pride is direct connected with sales.

    A lso as I concerned Nokia it is not a European country that I should support with my buys, it is another International company from now on.

    In addition, will the cuts off will solve the strategic fault that Nokia did with the choice to have to its phones the Microsoft Os instead of Android Os? The answer is of course not ….

  9. jbond
    February 16, 2012

    I have to think at this point Nokia needs to focus on survival. They have been losing market share for years, but still have a large volume. If they can continue to supply the low end, low cost phones while developing  new smartphones, they should be able to return to prominence. I highly doubt they will replace Apple or Samsung, but they can hope for growth.

  10. Jennifer Baljko
    February 16, 2012

    That number made my eyes pop too. Gradual cuts over time add up to surprising figures. From a pr standpoint, it makes sense to have layoffs in stages. But from an analytical perspective, the collective number begs the question of how deep the problems have been.

  11. Jennifer Baljko
    February 16, 2012

    Nemos -I see your point about national pride perhaps influencing a consumers sales choice, but not sure if it totally sways every purchase.

    In the US, we saw this “Made in the USA” flag-waving consumer-buying campaign some time ago when labor and production were offshored. Sure, maybe that got some people to buy an American-made car, for instance. But I would bet, they made that decision while sippling Columbia-grown coffee; wearing a t-shirt made in Thailand and sneakers made in Vietnam, and doing internet research on their Japanese-designed/Chinese-made smartphone or laptop. I think in a global economy, national pride is reserved these days for the political stage, not the business one.

  12. Jennifer Baljko
    February 16, 2012

    Jacob – I'm not sure Nokia's layoof and transferring prodcution to Asia is purely cost savings. Yes, of course, they are big part of the equation, and even with Chinese labor rates rising at a double-digit pace, I imaging paying workers in China is still far-and-away cheaper than paying wages in Finland, one of the most expensive countries in Europe. Also, since Nokia's bread and butter right now is the low-end handset — phones that have very low margins — balancing  the balance sheet. I guess what I'm not clear on is how much of the design aspect and startegy planning will remain in Europe, and how will they innovative on creating higher-margin products for mature markets while maintaining a sharp focus on high-volume sales in low-cost markets. That I don't has been explained, at least not in the stuff I read


  13. Jennifer Baljko
    February 16, 2012

    prabhakar – I agree with you. Asia and other emerging markets still have a lot of love for Nokia, but like you said they aren't moving fast enough to capture the transition sales that would naturally comes as feature phone users migrate to smartphones. 

    If Nokia could figure out this sweet spot –winning the conversion sales in growing BRIC economies, they might actually do more than survive.

  14. Jennifer Baljko
    February 16, 2012

    jbond – i agree…at this point I don't see them as a viable competitor to Apple or Samsung, but in the markets where they are strong, I think could strategically stay a leader if they would develop a stronger a mixed-product portfolio for those regions.

  15. Jennifer Baljko
    February 16, 2012

    elctrnx_lyf   “  wonder why not a nokia tablet with windows. I expect this to be coming soon!!!”

    Yeah, me too…although this space is getting crowded as well.

  16. Wale Bakare
    February 16, 2012

    There are still millions of people in Africa, Asia, and Latin America that rely on these kinds of phones.

    I would like to see Nokia in near future with device that can compete with Blackberry in places like Asia and Africa. I bet you, Nokia may find it difficult to fight in those markets years to come.   Africa in particular more and more people are grabing smartphones and tablets ( iPad especially) with internet connectivity.

  17. t.alex
    February 18, 2012

    Probably it needs to make sure Windows phone a success first before jumping into tablets which is crowded with lots of Android devices.

  18. saranyatil
    February 21, 2012

    Right now it shouldn't enter into tablet t.Alex as rightly pointed, first they need to establish windows + Nokia product it needs to flourish like other phones. Parallelly they can ideate a device that might do better ones

  19. Mr. Roques
    February 22, 2012

    Which market do you think has bigger competition? The low-end, low-cost market or the high-end, smartphone market?

    I *think* I remember every economics class I ever took saying the low-end probably has more competition. No?

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