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Nokia to Cut 10,000 Jobs, Divest Assets

{complink 3847|Nokia Corp.} 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 {complink 379|Apple Inc.} and {complink 4751|Samsung Electronics Co. Ltd.}.

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.

17 comments on “Nokia to Cut 10,000 Jobs, Divest Assets

  1. bolaji ojo
    June 14, 2012

    Nokia's planned additional layoffs hasn't impressed investors. The company's stock price fell more than 15 percent on the news. Shareholders were spooked by the fact its outlook remains grim. Job cuts don't seem to be enough anymore as far as investors are concerned. What they want is a product that's great, higher sales and the production processes and supply chain to match it.

  2. Wale Bakare
    June 14, 2012

    “We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones”.

    I think Nokia's problem has compounded since adoption of Windows OS for its feature phones to run on – that platform simply not too attractive to consumer market but desktop devices. Unless Nokia refocus its phone OS to either adopt something of mass appealing or completely switch back to Symbia. Am afraid Windows wont do any help in this tough market situation everyone is experiencing.

  3. Anna Young
    June 14, 2012

     “However, we must reshape our operating model and ensure that we create a structure that can support our competitive ambitions.”

    Rightly so, Bolaji. I think the investors are not asking too much here.
    I just wonder whether the plans to close its factories in Canada and Germany will restore the company's position in the market place. I doubt this. Could this be the end of Nokia?
    How much more restructuring and reshaping will restore order? 

     

  4. Ariella
    June 14, 2012

    @Anna I wouldn't think it's the final nail in the coffin, but it does appear to be one the nails. Job cuts show a shift in numbers that can reduce loss, but it doesn't necessarily signal a new direction toward success. Unfortunately, cutting jobs is easier for most companies than coming up with a real solution to the problems that plague it. 

  5. elctrnx_lyf
    June 14, 2012

    Nokia needs to focus on the right market of smart phones. They should become more aggressive and should launch devices with android to compete against Samsung. Microsoft is not attractive and famous among the smart phone consumers.

  6. Anna Young
    June 14, 2012

    Absolutely, Ariella. A shift in number like you said may reduce the company's loss significantly, however, will not immediately restore increase in performance. More I think is required from Nokia to arrive at a desired destination. 

  7. Wale Bakare
    June 14, 2012

    @Ariella do you think  spreading 10,000 reponsibilities ontop of others not OK? Considering million of Euros the company would save but i think this should direct to R&D instead.

  8. Ariella
    June 14, 2012

    @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.

  9. prabhakar_deosthali
    June 14, 2012

    Bolaji,

     

    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.

     

     

  10. Wale Bakare
    June 14, 2012

    “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.

  11. Anna Young
    June 14, 2012

    Hmm! good point Wale. It's a wait and see game.

  12. bolaji ojo
    June 14, 2012

    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.

  13. bolaji ojo
    June 14, 2012

    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.

  14. bolaji ojo
    June 14, 2012

    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.

  15. bolaji ojo
    June 14, 2012

    @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.

  16. Wale Bakare
    June 15, 2012

    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.

  17. t.alex
    June 15, 2012

    Yes, selling hope. He brings Nokia downhill together with Microsoft. Microsoft seems to have nothing to lose but this is a big loss for Nokia.

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