In a landmark move designed to address so-called “soft” market conditions, Nokia has announced plans to cut up to 14,000 jobs. These cost-cutting efforts come as part of a broader restructuring effort aimed at streamlining operations.
Nokia’s Major Workforce Reduction
Nokia, Finland’s largest telecommunications company and a major player in the 5G device sector, currently employs 86,000 private workers. With the proposed downsizing, the company aims to reduce its headcount from 72,000 to 77,000. This measure is expected to significantly impact the company’s staffing expenses.
Cost-Cutting and Savings Projections
Nokia anticipates a substantial reduction in staffing expenses by 10% to 15%. Furthermore, it estimates savings of at least €400 million (approximately $421.4 million) by 2024. In the grand scheme of things, Nokia expects these reductions to result in cumulative cost savings reaching €1.2 billion (approximately $1.3 billion) by the end of 2026 . Its a move aimed at protecting the financial future of the company.
CEO’s Human-Centered Approach
Pekka Lundmark, Nokia’s CEO, acknowledges the human impact of these changes, stating, “The most difficult business decisions to make are the ones that impact our people.” He reassures employees, saying, “We have immensely talented employees at Nokia, and we will support everyone that is affected by this process.” The humane approach is notable in the face of such a substantial workforce reduction.
Disappointing Financial Results
The announcement coincided with Nokia’s disappointing financial results for the third quarter, compared with the same period a year ago, with sales down 15% the Company said as “major economic uncertainty”, and the pressure created by higher interest rates. Notably, the challenging economic climate has affected the performance of even major industry players like Nokia.
Challenging Market Environment
Nokia also experienced significant growth in mobile network sales, down 19% in the third quarter compared to a year earlier. This slowdown is partly due to slow 5G adoption in markets like India. Nokia’s Swedish rival, Ericsson, voiced similar concerns about a challenging environment and economic uncertainty affecting their sales outlook for the latter half of 2023.
Positive Outlook for Nokia
Despite the setbacks and challenging circumstances, Nokia maintains a positive outlook for 2023. It forecasts sales between €23.2 billion and €24.6 billion (equivalent to $24.4 billion and $25.9 billion) for the full year. CEO Lundmark believes in the long-term attractiveness of their markets, indicating a determination to weather the economic storm.
In summary, Nokia’s workforce reduction plan may be challenging, but it is a strategic move aimed at securing the company’s future amidst a turbulent economic landscape. CEO Pekka Lundmark’s humane approach to these changes reflects the company’s commitment to supporting its employees during this transitional period. Despite disappointing financial results, Nokia remains optimistic about its prospects in the years to come.