Phone major Nokia announced its plans to cut 3,500 jobs
in its technical operations in Europe and the US.
The company will also cut jobs in sales, marketing and
corporate functions globally.
Industry analysts said the cuts come primarily in the form of a factory in
Romania that will be shut down, with further jobs slashed in the
location division.
Cutting the location division does represent further Nokia focus on its
core strategy — devloping smartphones within the Windows phone ecosystem.
Unfortunately for Nokia, this also represents further struggles to
realize that strategy.
While Nokia has put its eggs in the Microsoft basket, its Redmond-based
partner has not returned the favor. Microsoft has not slowed down to
wait for Nokia, as just two weeks ago, USA mobile carrier AT&T
announced its launch partners–HTC and Samsung–for the Mango release of
Windows Phone 7; Nokia noticeably absent from that list.
“Nokia, even
at times of strength, has struggled in the US market, a problem the
Microsoft partnership was supposed to remedy. For now, it seems like
that remedy will remain only future hope, as this development brings
into question whether the former leading phone manufacturer can, as
promised, bring Windows Phone devices to market before the critical
holiday sales period of 2011. If not, this announcement might not be
the last of the job cuts we hear from Espoo,” said Craig Cartier, ICT Analyst for Frost & Sullivan.
The new cost cutting effort is in line with Nokia’s
plans to reduce its Devices and Services operating expenses. Nokia targets to
exceed its previous Devices & Services operating expense reduction target
of EUR 1 billion for the full year 2013, compared to the full year 2010 Devices
& Services operating expenses of EUR 5.65 billion.
Nokia has also announced
closure of its manufacturing facility in Romania by the end of 2011. The
closure will result in considerable impact on its employees of approximately
2,200.
We are seeing solid
progress against our strategy, and with these planned changes we will emerge as
a more dynamic, nimble and efficient challenger,” said Stephen Elop, president
and CEO, Nokia.
Europe is core to Nokia’s
future. In addition to our headquarters, we have a strong R&D presence in
Europe. We have four major R&D sites in Finland and two major R&D sites
in Germany, as well as Nokia Research Centers and other supporting R&D
sites in Europe. Nokia also retains a strong local presence in our many sales
offices throughout this region, as well as our operations in Salo and Komarom,”
Elop added.
Nokia slashed its
workforce earlier as well due to retrograding business growth. Nokia group
posted 7 percent decrease in revenue in Q2 2011 at EUR 9.3 billion as compared
with EUR 10 billion in Q2 2010. Nokia’s income device business has declined by
20 percent, while Nokia Siemens Networks reported 20 percent growth during the
period.
In fact, Nokia has been
examining factors impacting
negatively on their business. The factors found by Nokia were competitive
market trends across multiple price categories, particularly in China and
Europe, product mix shift towards devices with lower average selling prices and
lower gross margins and pricing tactics by Nokia and certain competitors.
To overhaul impacts, Nokia
took action and announced strategic collaboration with Accenture that resulted
in the transfer of Nokia’s Symbian software activities. In addition,
Nokia announced reduction in global workforce by about 4,000 employees by the
end of 2012, with the majority of reductions in Denmark, Finland and the UK.
The company needs to restructure its business model to lower the cost of
producing, marketing and integrating technologies demanded by operators in the
region. Price is likely to remain a key differentiator for the acquisition of
network solutions and services in Africa.
By Rashi Varshney
editor@telecomlead.com
