Nokia Oyj plans to cut as many as 14,000 jobs, or 16% of its workforce, as a dearth of investment in fifth-generation mobile infrastructure forces it to take cost-cutting measures.
(Bloomberg) — Nokia Oyj plans to cut as many as 14,000 jobs, or 16% of its workforce, as a dearth of investment in fifth-generation mobile infrastructure forces it to take cost-cutting measures.
The move is expected to save as much as €400 million ($421 million) next year and an additional €300 million in 2025, the Espoo, Finland-based mobile network company said in a statement Thursday.
Makers of 5G equipment are struggling as their clients in the US and the European Union cut capital spending after building out their networks. The substantial job cuts came after Nokia posted weaker-than-expected earnings and said the slump in the mobile networks market would be deeper than it previously forecast.
“Operators have found it challenging to monetize their 5G investments,” Chief Executive Officer Pekka Lundmark said in an interview after the earnings. “It will come, but it seems to be taking longer than originally thought.”
Swedish rival Ericsson AB also delivered a disappointing outlook this week, saying market weakness will persist into the fourth quarter and beyond.
Growth in the India market “is no anymore able to compensate fully for what we are losing in North America,” Lundmark said. “But what comes down, will go back up again and we do not know what the timing is. That’s why we are taking action.”
Shares fell 1.3% to €3.22 at 10:25 a.m. in Helsinki.
Lundmark declined to provide additional details on who would be affected by the job cuts, but said “it’s really important to protect R&D.”
Adjusted operating profit was €424 million in the third quarter, according to a separate statement. That compares to an average analyst estimate of €545.2 million, according to a Bloomberg survey.
Nokia cut its forecast for the total addressable market, expecting a 9% slump for the mobile networks market overall in 2023. It had previously expected a 2% decline.
Nokia missed sales and profit expectations “across the board,” Citi analyst Andrew Gardiner said in a note. “While anticipated directionally following Ericsson’s similar miss, we think the magnitude of the shortfall is greater than reset expectations.”
Lundmark said Nokia is on track to achieve the lower end of its net sales target for the year and the mid-point of its comparable operating margin range. He had previously painted a gloomy picture for the second half of the year when the company downgraded its 2023 guidance in July.
Nokia kept its full-year guidance for sales to €23.2 billion to €24.6 billion, with a comparable operating margin in a range of 11.5% to 13%.
Patent disputes with Chinese smartphone vendors Oppo and Vivo continue, but Nokia expects they will be resolved by the end of the year, according to Lundmark. Nokia’s forecasts assume they will be settled this quarter.
“Nokia reported a clearly weaker than expected 3Q result this morning, with the deceleration in Mobile Networks and Network Infrastructure much stronger than anticipated,” Inderes analyst Atte Riikola said in a note. “Eyes are already on next year, and there’s considerable uncertainty as shown by the significant savings program announced by Nokia.”
(Updates with CEO comments starting in fourth paragraph.)
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