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Nokia Details First Steps in Road to Recovery

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.

15 comments on “Nokia Details First Steps in Road to Recovery

  1. prabhakar_deosthali
    April 27, 2011

    As a staunch supporter of Nokia , I still believe that this Finix will rise from the ashes again. Like Apple which had lost a lot of ground in PC domain because of the dominance of Microsoft all over the world, regained it with its Iphone and Ipad products and is now  way ahead of the competition, Nokia should also soon catch up again with the rest of the world .

  2. Eldredge
    April 27, 2011

    Perhaps they are playing close to the vest regarding their product development plans right now. Innovation will need to be a major part of their plan.

  3. Parser
    April 27, 2011

    If a company dwells on basic business operations like expense, procurement, supply and manufacturing they are in deep trouble. This is not a startup, which does not know these things. They have to concentrate on innovation, engineering and time to market. Since Apple is dominate at present they have to find their own niche or create their own niche. I think they can do it. I do not see much talk about innovations. 

  4. Ms. Daisy
    April 27, 2011

    Parser:

    You are right on the basic stuff! It is organizational regression to go back to the basics instead of looking for areas of advancement. Nokia need to borrow a leaf from Apple that primed its own pump after loosing grounds on the PC to Microsoft. It found a niche in the Iphone and tablets products. Nokia just needs to either re-invent some of its poduct or look for gaps that it could fill and excel. 

  5. DataCrunch
    April 27, 2011

    I am very curious to see the new wave of devices from Nokia featuring Windows.  Depending on how their initial launch goes may determine the fates of both mobile initiatives of both companies.  I tend to believe that they will make a positive splash as there is too much at stake.

  6. maou_villaflores
    April 27, 2011

    Well yeah Nokia should catch-up with the rest of the phone companies they are so outdated with it comes to usability and presentation.

  7. jbond
    April 28, 2011

    Parser:

    You are dead on with your assessment. Nokia is not a startup company. They have been in the market for a long time. If they try to grow by going back to square one, they are headed in a very different direction. Nokia still has a lot of potential. They need to focus their efforts on research and innovations. Stop trying to play catch up to some of these companies by trying to knock the big guy (Apple) of the hill. Focus on developing products that will not only keep your current customers, but also bring in many new ones.

     

  8. electronics862
    April 28, 2011

    Nokia is not doomed yet. As long as Nokia is open to reworking its marketing strategies, it stands a good chance of remaining the dominant player in the handset market and perhaps even generating larger revenues..

  9. tioluwa
    April 28, 2011

    I think its a vital point noted by Bolaji in this article

     That sector, as Apple has so well demonstrated, requires that a viable player be more than a hardware company

    It going to take a whole lot more than plain old organizational restructuring to get Nokia back up.

    Whatever strategy they will come up with, i'm convienced they are working out something, they may not say, but when its done, we will all see it.

    I Nokia has such a wide range of products, and i feel that can't work anymore.

  10. Taimoor Zubar
    April 28, 2011

    @Dave: I am with you on this one. I think the Nokia-Microsoft deal to develop phones having Windows OS is probably an interesting thing to look forward to, and this may be the development that can get Nokia out of it's troubles.

  11. SunitaT
    April 29, 2011

    @Prabhakar,

      I totally agree with you. Finix will rise from the ashes again. I guess right now Nokia is just concentrating on smartphone segment. For example the hardware features of Nokia N8 handsets are pretty attractive like  12MP cam, Xenon flash, mechanical shutter ,renowned Carl Zeiss lens etc. I am sure WIn-NOKIA will be very good alternative to Apple/Android handsets.

  12. Backorder
    April 29, 2011

    Agree with Dave. One would like to be optimistic for the sake of the market. However, with all this news, there is too much bad publicity that Nokia is gathering. It might be difficult for it to break this coccoon even with introduction of decent products in the future. Trust and goodwill have been the hallmarks of Nokia-Connecting People. It can not afford to lose it.

  13. seel225
    May 3, 2011

    Nokia, the world's largest volume of phone maker is back on the road to recovery.I am very sure that Nokia has made some good plans for future but they are not revealing until they have something good which makes their competitors worry.Nokia was always top on cell phone market and it will be.

  14. Susan Fourtané
    May 4, 2011

    “Trust and goodwill have been the hallmarks of Nokia-Connecting People. It can not afford to lose it.”

    @Backorder,

    You are right. But that was before Nokia partnered with Microsoft. Does Microsoft have a trust and good will background as Nokia has? 

    -Susan


  15. Ms. Daisy
    May 12, 2011

    It is clear that Nokia is cleaning house and probably getting rid of redundancy and trimming the bloated staff size. But what is the strategic plan to move the company forward? Yes, size reduction helps to increase the bottom line on the short run, but lack of operational re-tooling and innovation will slow recovery if not end the company in relapse.

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