Finnish telecom group Nokia Oyj (NYSE: NOK) announced plans to trim down up to 10,000 jobs within two years to divert higher investment into research and development (R&D) for better growth and margin prospects, including stepping up of its competition with Telefonaktiebolaget LM Ericsson (NASDAQ: ERIC) and Huawei Technologies Co Ltd, Reuters reports.
- Nokia CEO Pekka Lundmark had to initiate changes to recuperate from product gaffes under its previous management that impacted its 5G ambitions and share prices. After product missteps, Nokia had reduced its profit outlook, froze dividend payouts, and lost over a fifth of its market value under the previous management.
- In October, Nokia announced four business groups towards acquiring a leading position in 5G, including capturing Huawei’s market share. The company intended to raise investments in R&D and future capabilities, including 5G, cloud, and digital infrastructure. Lundmark is expected to elaborate on his long-term strategy, action plans, and financial targets during the company’s capital markets day on Thursday.
- Nokia has earmarked around $715 million (€600 million) to €700 million for restructuring and associated charges by 2023. Nokia currently had 90,000 employees, after trimming thousands of jobs following its Alcatel-Lucent acquisition in 2016.
- The company expects the current restructuring to reduce its cost base by €600 million by 2023 end. Half of the savings are estimated to be realized in 2021. These global restructuring plans were estimated to affect most countries.
- Nokia expects the consultation processes to start shortly in Europe. France, where it trimmed over a thousand jobs last year, was excluded from the current restructuring. However, the ambitious savings program is not expected to lead to lower costs.
- While both Nokia and Ericsson had been gaining more customers following the 5G network rollout, the latter had an edge partly due to its 5G radio contracts in China. Nokia had not won any 5G radio contract in China and also lost out to Samsung Electronics Co Ltd (OTC: SSNLF) on the part of a 5G equipment supply contract to Verizon Communications Inc (NYSE: VZ).
- Price action: NOK shares traded higher by 0.47% at $4.32 in the premarket session on the last check Tuesday.