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October 21, 2010

New Nokia chief dumps 1,800 workers

But better than expected financials lift the gloom

By

Struggling Finnish mobile maker Nokia has announced that it will shed around 1,800 jobs globally as new CEO Stephen Elop stamps his authority on the company.

Nokia CEO Stephen Elop

The announcement came as Nokia revealed better than expected financial results. Revenue stood at €10.27bn, up from €9.81bn this time last year, but non-IFRS operating profit dropped from €741m to €634m. Net profit was €529m, well up on the loss of €559m reported last year due to restructuring costs. The company sold 26.5 million smart phones in the quarter, up an impressive 61% on the year ago quarter.

The company also saw higher than expected average selling price of its phones, up from €64 last year to €65 this time. Nokia’s shares rose 8% after the announcement.

However Elop, recruited from Microsoft just last month, has decided to wield the axe and cut the company’s workforce but up to 1,800. "Nokia has today communicated to its employees the company’s plans to accelerate its transformation and increase effectiveness. The plans include simplifying operations in product creation in Nokia’s Symbian Smartphones organisation, as well as Nokia’s Services organisation and certain corporate functions. The plans are expected to result in a reduction of up to 1800 employees globally," the company said in a statement.

"Changes impacting personnel are always difficult. We are committed to managing these changes in a way that reflect Nokia’s values, and will support affected employees with alternative solutions, such as helping them find new positions within the company," added Juha Äkräs, EVP of HR. "The aim is to accelerate the company’s transformation towards a leading mobile solutions provider, and to do this we are simplifying and integrating operations within our product creation and corporate functions."

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In a statement to accompany the financial results, CEO Elop said: "our company faces a remarkably disruptive time in the industry, with recent results demonstrating that we must reassess our role in and our approach to this industry. We will make both the strategic and operational improvements necessary to ensure that we continue to delight our customers and deliver superior financial results to our shareholders."

Nick Jones, analyst at Gartner, said that the financial results were, "unexciting, but that’s irrelevant. Steve Elop hasn’t been on the job long enough to impact the finances yet, he’s still in the honeymoon period and I don’t think anyone expected dramatic changes at this point."

He added on his blog: "I see [the staff cuts] as rationalisation rather than any strategic change. Nokia is still committed to Symbian and to services. This announcement doesn’t address the issue of what to do about the Symbian Foundation, which as I’ve noted before … is a big problem that needs to be addressed because it’s slowing Nokia down. The most interesting aspect of Nokia’s Q3 results is what was not said. So far Steve Elop has been making minor adjustments to staffing and strategy. I suspect something more radical is yet to come."

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