Finnish telecommunications giant Nokia has unveiled plans to cut up to 14,000 jobs as part of a sweeping cost-cutting initiative following a significant 20% drop in third-quarter sales, mainly attributed to a slump in the demand for next-generation 5G equipment.
Nokia, alongside its competitor Ericsson, has grappled with sluggish demand for 5G infrastructure in regions like the United States. To counter this downturn, they have attempted to bolster sales in India, albeit in a low-margin market.
Nokia’s objective is to achieve cost savings ranging from 800 million euros ($842 million) to 1.2 billion euros by 2026, aligning with its long-term target of a minimum 14% comparable operating margin by that year.
The restructuring program is projected to reshape the organization, reducing its headcount from the current 86,000 employees to a range of 72,000 to 77,000, according to the company’s official statement.
The company announced, “Nokia anticipates swift implementation of the program, with at least 400 million euros in savings expected in 2024, and an additional 300 million euros in 2025.”
Ericsson, which has also laid off a significant number of employees in the past year, acknowledged on Tuesday that the uncertainty affecting its business would persist until 2024.
Nokia’s CEO, Pekka Lundmark, stated, “While our third-quarter net sales were impacted by the ongoing uncertainty, we expect to see a more typical seasonal uptick in our network businesses in the fourth quarter.”
Quarterly comparable net sales have declined from 6.24 billion euros to 4.98 billion euros compared to the previous year, falling short of the estimated 5.67 billion euros as per an LSEG poll.
In order to refocus strategically and protect investments in research and development, Nokia will transition to a leaner corporate structure, affording more operational autonomy to business units.
Lundmark emphasized the necessity of resetting the cost base, stating, “This is a crucial step to adapt to market uncertainty and ensure our long-term profitability and competitiveness.”
