Nokia to Cut 7,000 Jobs in Cost-Cutting Move

 

BERLIN — Nokia, the world’s leading cellphone maker, said Wednesday that it would eliminate about 7,000 jobs as part of a cost-cutting program that was deeper than expected.

The 12 percent reduction in the Finnish company’s global work force will help trim operating costs by €1 billion, or $1.47 billion, a 17 percent reduction, by the end of 2012. Analysts had expected that 5,000 to 6,000 jobs would be cut.

Stephen Elop, the former Microsoft executive who became Nokia’s chief executive in September, said the cuts and reorganization were needed to prepare for its partnership with Microsoft. Nokia plans to eventually phase out the Symbian operating system as it rolls out smartphones next year running Microsoft’s Windows Phone software.

“With this new focus, we also will face reductions in our work force,” Mr. Elop said. “This is a difficult reality, and we are working closely with our employees and partners to identify long-term re-employment programs.”

In a statement, Nokia said the reductions would be achieved by eliminating 4,000 jobs, mostly in Britain, Denmark and Finland, and by transferring 3,000 employees responsible for its Symbian operating system to Accenture, a global technology consultant to businesses.

The company, which is based in Espoo, Finland, employed 59,080 in its cellphone business at the end of 2010. The figure excludes staff at Nokia Siemens Networks, its network joint venture, and at Navteq, a U.S. mapping data company it owns.

Nokia produced 108.5 million mobile phones last year, supplying 32 percent of the global market, but this year the company ceded the lead in cellphone revenue to Apple, the maker of the iPhone, according to Strategy Analytics, a research firm.

In addition to the job cuts, which will become official following negotiations with labor representatives, Nokia said it planned to consolidate its research and development division so that each site had a clear role and mission. Nokia has mobile phone R.&D. sites in Finland, China, India, Germany, England, Denmark and San Diego.

Some sites will grow, others will contract and some will be closed as a result of the reorganization, Nokia said, without providing further details.

“This move was largely anticipated and follows Nokia’s need to reduce its cost structure,” said Michael Schroder, an analyst at FIM Bank, a private bank in Helsinki.

Nokia’s failure to capitalize on the smartphone boom has cost the Finnish company market share and prestige as the center of gravity in its industry has shifted from hardware and communications to software and applications.

Ericsson, the global leader in wireless network equipment, said Wednesday that the boom was still going strong, as it reported that demand for mobile broadband lifted its sales 17 percent in the first quarter from a year earlier to 53 billion Swedish kronor, or $8.7 billion.

Profit at Ericsson, based in Stockholm, more than tripled to 4.1 billion kronor from 1.3 billion kronor a year earlier, which the company attributed to cost-cutting and greater profitability in its networks business.

Most of the demand came from the United States and Canada, Ericsson said, where wireless operators like Verizon Wireless, AT&T and Rogers Communications are expanding the capacity of their 3G networks and installing new and faster networks based on a technology called Long-Term Evolution to handle rising traffic.

Ericsson said the level of data traffic on the world’s global mobile networks doubled in 2010 from 2009 and would continue to double each year for the next few years.

 

Despite Microsoft Partnership, Nokia Continues to Fade in Race With Rivals

The company, based in Espoo, Finland, said it planned to reduce annual operating expenses in its core devices and services business by 1 billion euros, or $1.44 billion, to 4.65 billion euros, or $6.72 billion, by the end of 2013.

“This reduction is expected to come from a variety of different sources and initiatives,” the company said, “including a reduction in the number of employees and normal personnel attrition, a reduction in the use of outsourced professionals, reductions in facility costs, and various improvements in efficiencies.”

Stephen Elop, the Microsoft executive whom Nokia hired to be chief executive last September, said the company would begin negotiations with its work force in Finland and elsewhere next week. Before those talks, Mr. Elop said, Nokia will not speculate on the number of jobs it may eventually cut.

“Speculation on the exact numbers and the timing of those numbers is best postponed until we discuss this with” worker representatives, Mr. Elop said in a conference call with financial analysts.

Some employees will be able to move into other jobs with Nokia, Mr. Elop said, and Nokia may have openings as a result of its partnership with Microsoft. Because of those opportunities, Nokia said it could guarantee employment to its existing employees through this year.

Nokia also confirmed that it had signed its agreement with Microsoft to obtain the Windows operating system for Nokia’s smartphones. The two companies announced the partnership on Feb. 11. Since then, Nokia’s stock price has fallen by about a third.

The cost-cutting initiative came as Nokia lost its lead in cellphone revenue to Apple, the research firm Strategy Analytics said on Thursday, according to Reuters.

Nokia’s phone revenue fell to $9.4 billion in the last quarter, while Apple’s revenue from the iPhone increased to $11.9 billion, the research firm said.

“With strong volumes and high wholesale prices, the PC vendor has successfully captured revenue leadership of the total handset market in less than four years,” Alex Spektor, an analyst, said.

Nokia also reported Thursday that its profit fell slightly, to 344 million euros ($497 million) in the first quarter from 349 million euros ($504 million) in the period a year earlier.

Sales rose 9.2 percent, to 10.4 billion euros ($15.0 billion), in large part because of gains in Latin America and China, where Nokia’s sales rose 29 percent and 30 percent respectively. Sales in North America fell 36 percent, and sales in Europe fell 5 percent.

Nokia said its sales of smartphones rose 13 percent in the quarter, to 24.2 million units from 21.5 million. The market grew 74 percent over all during the same time, Francisco Jeronimo, an analyst with the International Data Corporation in London, said.

On top of that, the average selling price fell 6 percent in the same period, to 147 euros from 155 euros a year earlier, Nokia said.

The company said it had sold 108.5 million cellphones of all types during the quarter, 1 percent more than a year ago. Yet its global share of the cellphone market fell to 32 percent from 34 percent a year ago, according to I.D.C.

Mikko Ervasti, an analyst at Evli Bank, a private bank in Helsinki, said the cuts in operating expenses were needed to bring Nokia in line with its cellphone peers, like Apple, which on average spend only half or even less on research and development than Nokia does.

Mr. Ervasti said the cost-cutting could translate into 6,000 fewer jobs in its cellphone research and development work force, or roughly 38 percent of Nokia’s total staff for mobile phones. Those employees are now working in Finland, China, India, Germany, England, Denmark and San Diego.

“These cuts were needed and are in line with what the market was expecting,” Mr. Ervasti said. “This is a direct consequence of the Microsoft agreement, and Nokia’s own need to trim expenses.”

 

Despite Microsoft Partnership, Nokia Continues to Fade in Race With Rivals

 

The company, based in Espoo, Finland, said it planned to reduce annual operating expenses in its core devices and services business by 1 billion euros, or $1.44 billion, to 4.65 billion euros, or $6.72 billion, by the end of 2013.

“This reduction is expected to come from a variety of different sources and initiatives,” the company said, “including a reduction in the number of employees and normal personnel attrition, a reduction in the use of outsourced professionals, reductions in facility costs, and various improvements in efficiencies.”

Stephen Elop, the Microsoft executive whom Nokia hired to be chief executive last September, said the company would begin negotiations with its work force in Finland and elsewhere next week. Before those talks, Mr. Elop said, Nokia will not speculate on the number of jobs it may eventually cut.

“Speculation on the exact numbers and the timing of those numbers is best postponed until we discuss this with” worker representatives, Mr. Elop said in a conference call with financial analysts.

Some employees will be able to move into other jobs with Nokia, Mr. Elop said, and Nokia may have openings as a result of its partnership with Microsoft. Because of those opportunities, Nokia said it could guarantee employment to its existing employees through this year.

Nokia also confirmed that it had signed its agreement with Microsoft to obtain the Windows operating system for Nokia’s smartphones. The two companies announced the partnership on Feb. 11. Since then, Nokia’s stock price has fallen by about a third.

The cost-cutting initiative came as Nokia lost its lead in cellphone revenue to Apple, the research firm Strategy Analytics said on Thursday, according to Reuters.

Nokia’s phone revenue fell to $9.4 billion in the last quarter, while Apple’s revenue from the iPhone increased to $11.9 billion, the research firm said.

“With strong volumes and high wholesale prices, the PC vendor has successfully captured revenue leadership of the total handset market in less than four years,” Alex Spektor, an analyst, said.

Nokia also reported Thursday that its profit fell slightly, to 344 million euros ($497 million) in the first quarter from 349 million euros ($504 million) in the period a year earlier.

Sales rose 9.2 percent, to 10.4 billion euros ($15.0 billion), in large part because of gains in Latin America and China, where Nokia’s sales rose 29 percent and 30 percent respectively. Sales in North America fell 36 percent, and sales in Europe fell 5 percent.

Nokia said its sales of smartphones rose 13 percent in the quarter, to 24.2 million units from 21.5 million. The market grew 74 percent over all during the same time, Francisco Jeronimo, an analyst with the International Data Corporation in London, said.

On top of that, the average selling price fell 6 percent in the same period, to 147 euros from 155 euros a year earlier, Nokia said.

The company said it had sold 108.5 million cellphones of all types during the quarter, 1 percent more than a year ago. Yet its global share of the cellphone market fell to 32 percent from 34 percent a year ago, according to I.D.C.

Mikko Ervasti, an analyst at Evli Bank, a private bank in Helsinki, said the cuts in operating expenses were needed to bring Nokia in line with its cellphone peers, like Apple, which on average spend only half or even less on research and development than Nokia does.

Mr. Ervasti said the cost-cutting could translate into 6,000 fewer jobs in its cellphone research and development work force, or roughly 38 percent of Nokia’s total staff for mobile phones. Those employees are now working in Finland, China, India, Germany, England, Denmark and San Diego.

“These cuts were needed and are in line with what the market was expecting,” Mr. Ervasti said. “This is a direct consequence of the Microsoft agreement, and Nokia’s own need to trim expenses.”