In response to a softer demand for cellphones, Reuters is reporting that Nokia is cutting phone
production at its key Salo plant in Finland. According to the report, the company wants to hack away at costs and will cut annual expenses at the handset unit by more than 700 million euros which is equivalent to about $905 million dollars. The 2,500 employees at the Salo plant will face temporary layoffs on a rotational basis. The factory is the last major handset plant in Western Europe and produces advanced cellphone models. A Nokia official says the idea is to match production with demand. The entire cellphone industry is expected to see a drop in sales this year except for the smartphone segment which is expected to grow at a 10 to 20 percent clip in 2009, according to most analysts. One analyst from Nomura Securities expects to see that estimate of smartphone growth cut sharply, saying that the industry outlook for growth in that segment is "flawed". Meanwhile, according to Reuters, Nokia also will close a research site employing 320 people and seeks 90 more jobs to cut. Sales in the handset market are expected to drop 18% in the first quarter of this year and the Finnish manufacturer is expected to report their weakest quarterly earnings report in seven years. Contrast all of this gloom and doom with the excitement and potential of the MWC show that starts next week in Barcelona.