Finnish mobile company, Nokia, announced that it will be letting go of about 14,000 people or about 16% of its work force, over the next three years. Currently it has a headcount of 86,000 and it will be reducing this to between 72,000 and 77,000 by the end of 2026.
This layoff is part of the company’s effort to reduce its cost base by EUR 800–1,200 million on a gross basis over a three year period to secure long-term profitable growth in the face of a more challenging market environment. This represents a 10–15% reduction in personnel expenses. Nokia expects to act quickly on the program with at least EUR 400 million of in-year savings in 2024 and a further EUR 300 million in 2025.
The announcement was made in the context of a reported 20% drop in sales and a 69% plunge in profits in the most recent quarter, spanning July to September, in comparison to the same period last year.
“We continue to believe in the mid to long term attractiveness of our markets. Cloud Computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities. However, while the timing of the market recovery is uncertain, we are not standing still but taking decisive action on three levels: strategic, operational and cost. First, we are accelerating our strategy execution by giving business groups more operational autonomy. Second, we are streamlining our operating model by embedding sales teams into the business groups and third, we are resetting our cost-base to protect profitability. I believe these actions will make us stronger and deliver significant value for our shareholders.”
Pekka Lundmark, Nokia’s President and CEO
Nokia was once a leader in the global mobile phone market, but lost its vantage position with the introduction of Apple’s iPhone in 2007. In 2013, Nokia divested its mobile phone division to Microsoft. Since the sale, the company has shifted its focus towards offering backend infrastructure for telecom systems to wireless providers, cable operators, and various business clientele.
The company is facing challenges due to a loss of market share in 5G technology to competitors in China. Chinese companies, with Huawei at the forefront, now dominate nearly half of the global 5G market.
In February this year, the company introduced its new logo, with the CEO saying it “is a nod to our path forward, marking a point of progress for Nokia as we look to the future with confidence and optimism.” With a new identity, Nokia said it was picking a new business model to distance itself from its phone-making past as it focuses on more B2B products
