STOCKHOLM (Reuters) – Nokia announced on Tuesday that it intends to cut up to 10,000 jobs in two years to reduce costs and invest more in research capacity, while the Finnish telecommunications group is trying to step up its challenge compared to the Swedish Ericsson and the Chinese Huawei.
After taking over the top position last year, CEO Pekka Lundmark has made changes to recover from product mistakes under the company’s previous leadership, which hurt his 5G ambitions and fired his shares.
He announced a new strategy in October, in which Nokia will have four business groups, and said the company will “do whatever it takes” to take the lead in 5G, as banks will also take over from Huawei.
Lundmark is expected to present its long-term strategy, discuss action plans and set financial targets on Thursday for the company’s capital market.
The company said in a statement that it expects about 600 million euros ($ 715 million) to 700 million euros of restructuring and associated taxes by 2023.
“Decisions that can have a potential impact on our employees are never made easily,” Lundmark said in a statement. “My priority is to make sure that everyone affected is supported through this process.”
Nokia currently has 90,000 employees and cut thousands of jobs following the acquisition of Alcatel-Lucent in 2016.
The current restructuring is expected to reduce its cost base by around € 600 million by the end of 2023. Half of the savings are expected to be achieved in 2021.
“These plans are global and are likely to affect most countries,” said a Nokia representative. “In Europe, we have only informed local works councils and we expect the consultation process to start soon, where appropriate.”
France, where Nokia cut more than a thousand jobs last year, has been excluded from the current restructuring.
The savings program is higher than expected, but what is interesting is that it will not actually lead to lower costs, said Sami Sarkamies, an analyst at Nordea.
“The company is shifting its focus from overall costs to research and development, which it expects to lead to better growth and margins in the future,” he said.
Nokia plans to increase investment in research and development and future capabilities, including 5G, cloud and digital infrastructure.
Under Lundmark’s predecessor, Nokia reduced its profit prospects and stopped paying dividends after the product’s missteps took more than a fifth of its market value.
In February, Nokia forecast that revenues in 2021 will fall by 20.6-21.8 billion euros ($ 25-26 billion) from 21.9 billion euros in 2020.
While both Nokia and Ericsson have gained more customers as more telecom operators start launching 5G networks, the Swedish company has a partial advantage due to winning 5G radio contracts in China.
Nokia did not win any 5G radio contracts in China and also lost to Samsung Electronics as part of a contract to supply 5G equipment to Verizon.
Nokia shares fell marginally in morning transactions.
(1 $ = 0.8389 euro)
Reporting by Supantha Mukherjee in Stockholm and Essi Lehto in Helsinki; edited by Niklas Pollard and David Evans