Nokia to Cut Up to 10,000 Jobs to Offset 5G Investment
March 16 2021 - 09:31AM
Dow Jones News
By Stu Woo
Nokia Corp. plans to cut between 5,000 and 10,000 jobs over the
next two years, a move it said would make it more competitive in
the 5G equipment market against rivals Huawei Technologies Co. and
Ericsson AB.
The job cuts would reduce the Finnish company's current
workforce of about 90,000 workers by as much as 11% and lower its
cost base by around $700 million, the company said Tuesday. It said
the savings would offset increased investment in research and
development, among other areas.
Nokia is in the early stages of its second major restructuring
program in less than a decade. After selling its once-dominant
handset business, Nokia acquired French rival Alcatel-Lucent to
focus on making cellular antennas, internet routers and other
telecommunications equipment. But it has lost ground to Huawei and
Ericsson because of its struggles to integrate Alcatel-Lucent, as
well as a major product-design blunder.
Nokia's share of revenue in the total telecom-equipment market
fell to 15% last year from 16% in 2019, according to research firm
Dell'Oro Group, while Huawei increased its lead to 31% from 28% in
the same period.
Last year Nokia replaced Chief Executive Rajeev Suri with Pekka
Lundmark, who said the company would retreat from its previous plan
of offering a range of products to focus on becoming a leader in 5G
cellular technology. The company said Tuesday that it would
streamline its product portfolio and continue to reduce costs. It
plans to announce more details about its strategy Thursday.
Part of Nokia's challenges stem from the company mistiming 5G
rollouts around the world. Wireless carriers started buying 5G
equipment earlier than anticipated and Nokia hadn't yet secured
enough cheap, efficient computer chips to go into its cellular
equipment. Its rivals had. As a result, Nokia's products were more
expensive and less power efficient than those of its
competitors.
In the U.S., Nokia last year lost a major 5G equipment contract
with Verizon Communications Inc. to Samsung Electronics Co. It
didn't win any major cellular contracts in its longtime market of
China, where Ericsson has become the leading foreign supplier of
5G-equipment.
Nordea analyst Sami Sarkamies said Nokia has a chance to become
more competitive after the restructuring, especially as the U.S.
campaign to curb Huawei has resulted in the industry leader losing
market share outside China.
After missing out on the smartphone revolution, Nokia sold its
cellphone business to Microsoft for $7 billion in 2013. The company
then decided to double down on its remaining telecom-equipment
business by buying Alcatel-Lucent for $17 billion in 2015, a move
aimed at broadening its product offerings.
That turned out to be a mistake, analysts said. "Many of the
problems that Nokia experienced over the past years stem from the
Alcatel-Lucent deal," Mr. Sarkamies said.
The deal left Nokia with two sets of equipment: One under the
Nokia brand, and another under the Alcatel-Lucent brand. Nokia told
its customers, which are wireless carriers, that it would replace
the Alcatel-Lucent equipment with Nokia gear.
The company has said that process took more time and money than
anticipated. Instead of investing in research-and-development as
Huawei and Ericsson did, Nokia had to focus on a complex
integration of two big companies Mr. Sarkamies said.
Write to Stu Woo at Stu.Woo@wsj.com
(END) Dow Jones Newswires
March 16, 2021 09:16 ET (13:16 GMT)
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