It plans to cut 5,000 to 10,000 jobs over the next two years, a move that 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 reduce its cost base by about $ 700 million, the company said Tuesday. He 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 off its once dominant mobile phone business, Nokia acquired French rival Alcatel-Lucent to focus on making mobile antennas, Internet routers and other telecommunications equipment. But it has lost ground to Huawei and Ericsson due to their struggles to integrate Alcatel-Lucent, as well as a mistake in the acquisition of computer chips that made their products more expensive and less desirable.
Nokia’s share of total telecom equipment market revenue fell to 15% last year from 16% in 2019, according to research firm Dell’Oro Group, while Huawei increased its lead to 31% from last year. 28% in the same period.
Last year, Nokia replaced CEO Rajeev Suri with Pekka Lundmark, who said the company would withdraw from its previous plan to offer a range of products to focus on becoming a leader in 5G cellular technology. The company said Tuesday it would optimize its product portfolio and continue to reduce costs. He plans to announce more details about his strategy on Thursday.
Part of Nokia’s challenges come from the company not timing 5G launches around the world. Wireless operators started buying 5G equipment ahead of schedule, and Nokia had not yet come up with enough cheap and efficient computer chips for its cellular equipment. His rivals had. As a result, Nokia’s products were more expensive and less energy efficient than those of its competitors.
In the US, Nokia lost a major 5G equipment contract with Verizon Communications last year. Inc.
to Samsung Electronics Co.
It did not win any major mobile phone contracts in its former China market, 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 US campaign to curb Huawei has caused the industry leader to lose market share outside of China.
After missing out on the smartphone revolution, Nokia sold its mobile phone business to Microsoft for $ 7 billion in 2013. The company decided to double its remaining telecommunications equipment business by buying Alcatel-Lucent for $ 17 billion in 2015, a measure aimed at expanding its product offering.
That turned out to be a mistake, analysts said. “A lot of the problems that Nokia has experienced in recent years stem from the Alcatel-Lucent deal,” said Sarkamies.
The deal left Nokia with two sets of equipment: one under the Nokia brand and one under the Alcatel-Lucent brand. Nokia told its customers, who are wireless service providers, that it would replace Alcatel-Lucent equipment with Nokia equipment.
The company has said that the process took more time and money than anticipated. Instead of investing in research and development like Huawei and Ericsson did, Nokia had to focus on a complex integration of two large companies, Sarkamies said.
Write to Stu Woo at [email protected]
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