Nokia Slashes 7,000 Jobs in Major Strategy Shift
Nokia Corp. said Wednesday it will slash 7,000 jobs worldwide, through both layoffs and outsourcing, as it strives to cut costs and catch up with its top rivals in the smartphone market.
Most of the 4,000 layoffs, due by the end of 2012, will be in Denmark, Finland and Britain, Nokia said.
It also plans to transfer 3,000 workers in China, Finland, India, Britain and the United States to Accenture PLC as it outsources Symbian platform operations to the global management-consulting firm, in a major shift of strategy.
Nokia's share price jumped more than 3 percent to euro6.15 ($8.99) in afternoon trading in Helsinki.
The announcements came as the world's top cellphone maker seeks to cut operating expenses by euro1 billion ($1.5 billion) by 2013 amid fierce competition that has seen its market share plunge and its profits plummet.
Markets had been eagerly expecting signals about company policy from Nokia's new CEO Stephen Elop since he took over in September and even more so since the Feb. 11 announcement that Nokia and Microsoft Corp. were teaming up to challenge rivals such as Research in Motion, Apple Inc. and Google.
"At Nokia, we have new clarity around our path forward, which is focused on our leadership across smart devices, mobile phones and future disruptions," Elop said Wednesday.
The announcements came as Nokia, which has 13,000 employees in Finland but indirectly provides work for more than 20,000 people here, had called workers for company briefings in several cities.
Elop said that none of the employees will lose their jobs this year, and that the personnel transfers would be made "over time."
Neil Mawston from Strategy Analytics market research described Nokia's announcements as "sensible" as it struggles against rivals.
"Profits are coming down, volume is less and shipments are less strong than they were, so it makes sense to right-size the cost base a little bit," Mawston. "The job cuts aren't as bad as they have been for some rivals."
Recently, Nokia has faced stiff competition from Research in Motion's Blackberry, Apple's iPhone and Google's Android at the top end of the market, as well as feeling the pinch from numerous Asian handset makers that produce cheaper phones in emerging markets.
It has been the world's largest handset maker since 1998, selling 432 million devices last year - more than its three closest rivals combined. But its market share continues to fall, to 29 percent in this year's first quarter - its lowest level since the late 1990s.
Even more damaging has been Nokia's inability to meet the challenges of new smartphones, a field where it used to be the leading innovator.
Although Nokia sold 24 million smartphones in the first quarter -- 13 percent more than in 2010 -- its market share for the devices plunged to 24 percent from 39 percent a year earlier, according to Strategy Analytics.
Today, the iPhone has set the standard for smartphones while BlackBerrys have become the favorite of the corporate set. And on the software front, Android has emerged as the top choice for phone makers that want to challenge the iPhone.
Mawston said that Nokia's future depends a lot on the success of its partnership with Microsoft and the type of phone they launch, expected late this year or in 2012.
"If it's a killer device then these job cuts will be long forgotten, and Nokia will be back in an upward movement," Mawston said. "If it's anything less than perfect, then it will be bad."
The Espoo-based company, near Helsinki, employs 132,500 people -- 7 percent more than a year ago.
Related Stories from Fins Finance