The inevitable job cuts have started at Nokia. The Finnish mobile phone company plans to reduce payroll by 4,000 by the end of 2012 and reassess the roles of its various research and development plans, with the possibility many of these may be shuttered as part of its cost reduction efforts.
As part of the restructuring announced Wednesday, April 27, Nokia expects to transfer the software development activities of its Symbian operating system to Accenture, along with 3,000 employees. It also will be cutting payroll, mainly in Denmark, Finland, and the United Kingdom.
Anyone who believes this will be Nokia's biggest job cuts under its current restructuring program may be in for a shock. In fact, as I've written, a more comprehensive recovery program that involves a detailed review of all aspects of the company's operations may be required to put Nokia back on the road to becoming a strong player in the wireless communications market. (See Will Nokia Rise Again?)
The job cuts announced by president and CEO Stephen Elop won't be the last in the ongoing reorganization, in light of the company's still bloated workforce and its lower personnel requirements following the decision to adopt Microsoft's Windows operating system for its handsets.
At the end of last year, Nokia had 132,427 employees, up from 123,553 in 2009, according to the company's annual filing with the US Securities and Exchange Commission. Of these, more than 56,000 were based in Europe, about 46,000 in China and Asia/Pacific, with the rest spread throughout the Middle East, Africa, and North and South America. Future job cuts will probably be focused in Europe as Nokia looks to slash overhead in high-cost regions.
In its first-quarter financial report, Nokia gave notice of what it expects to do, not just in the next few months, but over the next two years. Here's part of the statement relating to the future of the company:
- We are targeting to reduce our Devices & Services operating expenses for the full year 2013, compared to the full year 2010 Devices & Services operating expenses. This reduction is expected to come from a variety of different sources and initiatives, including a reduction in the number of employees and normal personnel attrition, a reduction in the use of outsourced professionals, reductions in facility costs, and various improvements in efficiencies. Due to the transition process, generally all current employees can stay on the payroll through the end of the year 2011, even those possibly impacted by the reductions.
This is why I believe today's move is only the first in a series of actions the company will be taking over the next years. Conspicuously absent in today's statement was a detailed product roadmap or at least the indication the company would be reviewing its extensive handset offerings to determine which ones would be mothballed and which would stay. Nokia also did not address plans for non-handset devices such as tablet computers, a glaringly missing piece of its portfolio.
Without a tablet PC, a deeper focus on the creation of a true Nokia community, and the development of what I call the beyond-hardware-company, Nokia will be just another widget vendor in the mobile communications market, no matter how much it reduces costs. That sector, as Apple has so well demonstrated, requires that a viable player be more than a hardware company. The interface with the consuming public, private or corporate, has become even more important than the actual product.
Also important, Nokia did not offer any information about what it plans to do in other critical operational sectors. What goals, for instance, has it set for operating expense, component procurement — and therefore supplier management — and manufacturing? I am convinced a plan exists for all these areas. I certainly hope it does. CEO Elop hinted at this in today's press release. “At Nokia, we have new clarity around our path forward, which is focused on our leadership across smart devices, mobile phones and future disruptions,” he said.
Prior “disruptions” caught Nokia flatfooted. Here's hoping its current plans will put it on firmer grounds.