Reasons Why Nokia is planning to cut over 10,000 jobs

Nokia Corporation is a Finnish multinational company. It deals in telecommunications, consumer electronics, and information technology. The company was founded in the year 1865. It has its headquarters in Finland.

Nokia is the world’s third-largest network equipment manufacturer according to 2018. The company had 1,03,000 employees and businesses in around 130 countries. Recently the company had announced that it would cut more than 10,000 jobs to reduce the costs of the company.

Certain reasons for cutting down on the jobs would include investing into research facilities.

New Long Term Plan of Nokia
Reasons for Job cut
Nokia to Invest in Research and Development
Competition of Nokia
FAQ

New Long Term Plan of Nokia

The new CEO of the company has new plans for the growth of Nokia. After being appointed as the CEO last year, Pekka Lundmark has been taking steps to recover Nokia's products. Under the previous management, there were certain missteps taken regarding the product. This led to the fall of Nokia and destroyed its ambitions in the 5G sector.

Nokia has announced a new strategy in October. According to the strategy Nokia will have four business groups. Pekka Lundmark also said that the company would do anything that would take for them to maintain the lead in 5G.

It is expected that Pekka Lundmark will discuss the long-term strategy, financial targets, and action plans during the company’s capital markets day.

Reasons for Job cut

According to the new strategy the company is trying to cut down the costs of the business. The company had said in a statement that by the year 2023 the company expects its restructuring and associated charges to be in between 600 million Euros (around INR 5,100 crores) to 700 million Euros (around 6,100 crores).

After the acquisition of Alcatel-Lucent which was a global telecommunication company, Nokia to cut thousands of Jobs. As of now, Nokia has around 90,000 employees.

The company expects that the recent restructuring programme would reduce the company’s cost by around 600 million Euros by the end of 2023. Half of the savings of the restructuring programme are expected to be realized by 2021. Reducing down the costs is one of the major reasons for cutting down the jobs of employees.

Nokia to Invest in Research and Development

The company is planning to invest more into Research and Development programmes for improving on the product and to make changes in the missteps taken during the previous management.

Sami Sarkamies who is an analyst working with Nordea said that the saving programme of Nokia is bigger than it was expected. He said that the interesting fact would be that it would not result in reducing the costs.

Sami Sarkamies also said that the company is trying to focus on Research and Development by shifting its focus from general costs. He also added that the shift in focus would result in better margins and growth of the company in the future.

The new management under Pekka Lundmark had predicted its profit outlook and had stopped the dividend payouts.  This was after the missteps taken regarding the product by the previous management. It had reduced the market share of Nokia.

The company has a forecast of 21.8 billion euros (around 1.8 lakh crores) to 21.9 (around 1.89 lakh crores) in 2020. It has plans to invest more into the future capabilities which include 5G, digital infrastructure, and cloud.

Competition of Nokia

Nokia had lost a lot of contracts and has seen the value of its share to decline. Nokia and the Swedish company have been competing with each other in rolling out 5G networks. Ericsson has a lead in acquiring customers. It has won a contract with China for 5G radio contracts.

While Nokia has not won any contracts with China and they also lost a contract with Verizon to supply 5G equipment. The Verizon contract was undertaken by Samsung Electronics.

Nokia is setting up its new plans to challenge Swedish company Ericsson and China’s Huawei. The company is working towards catching its lead with 5G and also trying to capture shares of Huawei.

FAQ

Who is the founder of Nokia?

Fredrik Idestam, Leo Mechelin, and Eduard Polón founded Nokia in 1865.

Is Nokia Indian company?

Nokia is an Finland based company which was recently taken over by HMD Global.

Why did Nokia fail in India?

After 2007, Nokia failed to sense that trends were changing and ignored the changing demands that led to fail of Nokia in India.

Conclusion

The Chief Executive Pekka Lundmark said that decisions regarding their employees, that would have a potential impact on them are never taken too lightly. He also said that everyone impacted through this process is supported through this and that would be his priority.

A representative of Nokia said that these plans are Global and it would likely affect a lot of countries. They have informed the local works council in Europe and the consultation process is expected to start soon according to the applicability.