Nokia will make up to 14,000 staff redundant as part of measures it hopes will save up to €1.2bn over the next three years. The Finnish telco has been putting a heavy focus on software-defined networks in recent years, but this has yet to pay off financially, with news of the job cuts coming on the same day it reported a 20% year-on-year drop in sales.
The company’s share price fell to its lowest point of the year when the news was announced this morning.
Why Nokia is making 14,000 staff redundant
In what it says is a bid to “better position the company for longer-term growth and enable it to navigate the current market uncertainty”, Nokia will aim to make cost savings of €800m to €1.2bn by 2026, based on current levels. This will apparently empower its business units “to operate with more autonomy and agility, in order to speed up execution of its strategy”.
Currently, Nokia employs 86,000 staff, but this number is expected to fall to between 72,000 and 77,000 over the next three years as part of the cost-saving measures. It says it wants to make cost savings across its mobile networks, cloud and network services divisions, as well as its corporate functions.
Pekka Lundmark, Nokia CEO, said that “the most difficult business decisions to make are the ones that impact our people”, adding: “We have immensely talented employees at Nokia and we will support everyone that is affected by this process.”
But he said: “Resetting the cost base is a necessary step to adjust to market uncertainty and to secure our long-term profitability and competitiveness. We remain confident about opportunities ahead of us.”
Struggles in the telco market
Nokia has seen its traditional networking hardware market disrupted by the cloud hyperscalers, who are taking a growing role in network provision through software-defined networks, which can be delivered from the cloud without the need for dedicated infrastructure.
As a result, it has pivoted to offering more software services of its own and has been building out this offering over the last two years. The company’s shareholders, however, have yet to see the benefit of this strategic change. Its quarterly results for the three months to the end of September show revenue of €4.98bn, down from €6.24bn a year ago. It pinpointed a slowdown in the 5G equipment market as one of the primary reasons for this.
The company’s cloud and networking business proved resilient, with sales falling just 2%, with Nokia reporting “strong growth” in its enterprise solutions business. Lundmark said he is confident the company’s strategy will pay off.
“We continue to believe in the mid to long-term attractiveness of our markets,” Lundmark said. “Cloud computing and AI revolutions will not materialise without significant investments in networks that have vastly improved capabilities. However, while the timing of the market recovery is uncertain.”
The news from Nokia comes two days after another telecom stalwart, Ericsson, said it expects uncertainty in its mobile networks business to persist into 2024, also blaming falling demand for 5G, particularly in the US market.