Nokia announces major restructuring; 10,000 jobs could be lost by 2013

Nokia announces major restructuring; 10,000 jobs could be lost by 2013
Nokia has issued a release Thursday morning, actually it was more of a dire warning. The Finnish based handset manufacturer said that to 'sharpen its strategy, improve its operating model and return the company to profitable growth' the company would cut up to 10,000 jobs and close its Salo factory by the end of 2013. The company wants to reduce its operating expenses while at the same time increasing the location based services it makes available to Nokia customers. It also plans on bringing in revenue by offering its mapping and location-based services to other industries

Nokia says it will invest in 'products and experiences' that will make Nokia handsets stand out and 'available' to more consumers. As a way to stand out and differentiate Nokia handsets from the competition, Nokia wants to offer more location-based services. And in an niche of the mobile handset market that has been getting smaller, Nokia said it wants to become more competitive and profitable in the feature phone side of the industry.

To keep the electricity on and the plants humming while going through this transition, Nokia says it needs to cut expenses and it will do so by cutting head count and closing factories. The company says it will post an operating profit in its Devices and Services group ASAP. To achieve this, Nokia has a plan. The company wants to broaden the price range of Nokia Lumia devices it offers and use Windows Phone as a way to differentiate itself from the competition. In a related development, as we have told you, Nokia improved its imaging assets by acquiring part of Sweden-based Scalado. The latter has imaging technology on more than one billion devices.Certain R&D projects will be scrapped resulting in the closing of facilities in Ulm, Germany and Burnaby, Canada; manufacturing will be consolidated leading to the planned closing of the manufacturing facility in Salo, Finland. R&D will still be done at the facility. There will be a focus on sales and marketing with certain regions getting prioritized. Non-core assets will be reduced and possibly divested. To that end, as we told you on Wednesday morning, Nokia will sell its luxury handset division, Vertu, to private equity firm EQT VI.

Nokia now has a goal of cutting 2013 operating expenses down to 3 billion EUR ($3.77 million USD), a reduction of more than 1 billion EUR. Nokia already has saved itself 70 million EUR in expenses during the first quarter of this year and expects to cut another 1.6 billion EUR from expenses by the end of next year. The company has also made some changes in management that leads to Chris Weber joining the Nokia Leadership Team beginning July 1st.

In an announcement that might get market analysts working on some new calculations, Nokia said that it will have lower operating margins in Q2 of 2012 than the -3% of Q1. In a language that only Wall Street understands, that is considered a major negative bit of news considering that the company had previously made a statement saying that operating margins for the second quarter would be similar to or lower than the -3% recorded in the first quarter. Leaving out the phrase "similar to" indicates that there is no hope that operating margins in the three months ending this month will be close to the first quarter figure.

Nokia's stock, which has dropped 40% in the last three months, bounced a bit last week on rumors of a bid for the company from Samsung. But Samsung denied that it was interested and Microsoft added that while it had taken a look at buying Nokia, it really wasn't interested at this time.

source: Nokia

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