Nokia Body.
SUFFICIENT -0.70%
plans to cut between 5,000 and 10,000 jobs in the next two years, a move it said will make it more competitive in the 5G device market against rivals Huawei Technologies Co. and Ericsson AB.
The job cuts would reduce the Finnish company’s current workforce by about 90,000 workers by up to 11% and reduce the cost base by about $ 700 million, the company said on Tuesday. He said the savings will offset increased investment in research and development, among other areas.
Nokia is in the early stages of its second major restructuring program in less than a decade. After selling its business with dominant phones, Nokia acquired French rival Alcatel-Lucent to focus on manufacturing cellular antennas, internet routers and other telecommunications equipment. But it lost ground to Huawei and Ericsson because of its struggles to integrate Alcatel-Lucent, as well as a mistake in procuring computer chips that made its products more expensive and less desirable.
A man scans a QR code at the Nokia booth at the Mobile World Congress in Shanghai in February.
Photo:
alex plavevski / Shutterstock
Nokia’s revenue share in the total telecommunications equipment market fell to 15% last year from 16% in 2019, according to research firm Dell’Oro Group, while Huawei increased its lead to 31% from 28 % during the same period.
Last year, Nokia replaced CEO Rajeev Suri with Pekka Lundmark, who said the company would withdraw from its previous plan to offer a range of products to focus on becoming a leader in 5G cellular technology. The company said on Tuesday it would streamline its product portfolio and continue to cut costs. He plans to announce more details about his strategy on Thursday.
Some of Nokia’s challenges stem from the fact that the company is mistaking 5G launches around the world. Wireless operators began buying 5G equipment earlier than expected, and Nokia had not yet secured efficient and cheap computer chips to get into its cellular equipment. They had his rivals. As a result, Nokia’s products were more expensive and less energy efficient than those of its competitors.
In the US, Nokia lost a major 5G equipment contract with Verizon Communications last year Inc.
to Samsung Electronics Co.
It has not won any major cell contracts in its long-standing market in China, where Ericsson has become the leading foreign supplier of 5G equipment.
Nordea analyst Sami Sarkamies said Nokia has a chance to become more competitive after the restructuring, especially since the US campaign to reduce Huawei has led to the loss of market share of the industry leader outside China.
After losing the smartphone revolution, Nokia sold its mobile phone company to Microsoft for $ 7 billion in 2013. The company then decided to double the remaining telecommunications equipment business by buying Alcatel-Lucent for $ 17 billion. in 2015, a movement aimed at expanding its product offerings.
This proved to be a mistake, analysts said. “Many of the problems Nokia has faced in recent years come from the Alcatel-Lucent agreement,” said Mr. Sarkamies.
The agreement left Nokia with two sets of equipment: one under the Nokia brand and another under the Alcatel-Lucent brand. Nokia has told its wireless customers that it will replace Alcatel-Lucent with Nokia.
The company said the process required more time and money than anticipated. Instead of investing in research and development, as Huawei and Ericsson did, Nokia had to focus on a complex integration of two large companies, Mr Sarkamies said.
Write to Stu Woo at [email protected]
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