Nokia to Cut Up to 14,000 Jobs as Part of Cost Reduction Plan

Nokia, the Finnish telecommunications giant, has announced plans to cut up to 14,000 jobs as part of a cost reduction plan following a significant decline in third-quarter earnings. The company aims to reduce its cost base and increase operational efficiency to address the challenging market environment it is facing.

As part of the cost reduction plan, Nokia is targeting to lower its cost base on a gross basis from 2023 by between 800 million euros ($842.5 billion) and 1.2 billion euros by the end of 2026. This will result in a reduction in the number of employees from the current 86,000 to between 72,000 and 77,000.

The decision to cut jobs comes after Nokia reported a 20% year-on-year decline in net sales for the third quarter, amounting to 4.98 billion euros. The company also witnessed a significant drop in profit during the same period, with a 69% year-on-year decrease to 133 million euros.

Nokia’s rival company, Ericsson, also recently announced plans to lay off 8,500 employees as part of its own cost-cutting strategy. Both Nokia and Ericsson have been facing headwinds from a slowing global economy and reductions in infrastructure spending by mobile operators.

Nokia’s mobile networks business, which is its largest unit by revenue, reported a 24% year-on-year decline in sales to 2.16 billion euros. The operating profit for the division also experienced a significant plunge of 64% year-on-year. The decline in sales was primarily driven by decreases in North America, while sales volumes in key market India were described as “moderated” due to the normalization of 5G deployments.

The impact of the COVID-19 pandemic and the resulting economic uncertainties have also contributed to cost-cutting measures in the United States, particularly with carriers such as Verizon and AT&T.

Despite the challenges, Nokia’s CEO Pekka Lundmark expressed confidence in the fundamental drivers of the company’s business. He mentioned that data traffic growth continues, the 5G rollout is still only around 25% complete (excluding China), and investments in networks with improved capabilities are necessary for the advancement of cloud computing and AI revolutions.

Nokia is not the only telecommunications equipment maker facing difficulties; Ericsson also reported similar issues in North America and projected ongoing uncertainty in its mobile networks business until 2024. This raises concerns about the recovery of the telecommunications industry as a whole.

Despite the job cuts and revenue decline, Nokia is still expecting full-year net sales within a range of 23.2 billion euros to 24.6 billion euros, standing by its original forecast.

Overall, the cost reduction plan and job cuts come as Nokia seeks to navigate through the challenging market environment, optimize its operations, and position itself for future growth in the telecommunications industry.