STOCKHOLM (Reuters) – Nokia on Tuesday announced plans to cut up to 10,000 jobs over two years to cut costs and invest more in research capabilities, as the Finnish telecoms group seeks to step up its challenge to Sweden’s Ericsson and China’s Huawei.
After taking on the top job last year, CEO Pekka Lundmark has been making changes to recover from product missteps under the company’s previous management that damaged its 5G ambitions and dragged its shares.
He announced a new strategy in October, under which Nokia will have four business groups, and said the company “would do whatever it takes” to take the lead in 5G, as it is confident of capturing Huawei’s stake as well.
Lundmark is expected to present its long-term strategy, discuss action plans and set financial goals during the company’s capital markets day on Thursday.
The company said in a statement that it expects between € 600 million ($ 715 million) and € 700 million of restructuring and associated charges by 2023.
“Decisions that can have a potential impact on our employees are never made lightly,” Lundmark said in a statement. “My priority is to ensure that all those affected receive support during this process.”
Nokia currently has 90,000 employees and has cut thousands of jobs following the acquisition of Alcatel-Lucent in 2016.
It expects the current restructuring to reduce its cost base by around € 600 million by the end of 2023. Half of the savings are expected to materialize in 2021.
“These plans are global and will likely affect most countries,” said a Nokia representative. “In Europe, we have just informed the local works councils and we hope that the consultation processes will start soon, where appropriate.”
France, where Nokia cut more than 1,000 jobs last year, was excluded from the current restructuring.
The savings program is larger than expected, but what’s interesting is that it won’t actually result in lower costs, said Sami Sarkamies, an analyst at Nordea.
“The company is shifting the focus from overhead to research and development, which is expected to result in growth and better margins in the future,” he said.
Nokia plans to increase investments in research and development and future capabilities including 5G, cloud and digital infrastructure.
Under Lundmark’s predecessor, Nokia slashed its earnings outlook and halted dividend payments after the product’s missteps reduced its market value by more than a fifth.
In February, Nokia forecast 2021 revenue to fall to between € 20.6-21.8 billion ($ 25-26 billion) from € 21.9 billion in 2020.
While Nokia and Ericsson have been gaining more customers as more telecom operators start to roll out 5G networks, the Swedish company has an advantage in part because it won 5G radio contracts in China.
Nokia has not won any 5G radio contracts in China and also lost to Samsung Electronics in a part of a contract to supply 5G equipment to Verizon.
Nokia shares fell marginally in morning trading.
($ 1 = 0.8389 euros)
Reporting by Supantha Mukherjee in Stockholm and Essi Lehto in Helsinki; edited by Niklas Pollard and David Evans