Sales and profits collapsed
Nokia wants to cut up to 14,000 jobs
October 19, 2023, 4:06 p.m
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Nokia, once one of the world’s largest players in the mobile phone sector, is currently mainly busy with 5G expansion. And it doesn’t work as expected. Sales and profits fell well short of expectations in the third quarter. This causes the company to go into clear-cutting.
The Finnish mobile communications equipment manufacturer Nokia is responding to weak demand by cutting up to 14,000 jobs. After a surprisingly sharp drop in sales in the third quarter, Nokia boss Pekka Lundmark is putting the brakes on costs. The manager now wants to save between 800 million and 1.2 billion euros by 2026. “Nokia expects the program to be implemented quickly with savings of at least 400 million euros in 2024 and a further 300 million euros in 2025,” the group said.
The savings should result in Nokia only having between 72,000 and 77,000 employees instead of the previous 86,000 employees. The goal is to create an operating margin of at least 14 percent by 2026. Nokia did not say where the jobs would be cut. However, it was said that “action would be taken quickly” in the areas of mobile networks, cloud and network services as well as in administration.
Net sales on a comparable basis fell to 4.98 billion euros in the third quarter from 6.24 billion euros a year ago. Profit fell by 69 percent to 133 million euros or 2 cents per share. Analysts surveyed by LSEG had expected sales of 5.67 billion euros and a profit of 395 million euros. In particular, sales of equipment for the 5G mobile communications standard have been slow in markets such as North America.
US market is a headache
The downward spiral was particularly evident in the company’s most important market. In North America, net sales fell by 40 percent, admitted Nokia boss Lundmark. “While our third quarter revenues were impacted by ongoing uncertainty, we expect a more normal seasonal improvement for our network business in the fourth quarter,” the manager said.
Lundmark declined to provide further details about the upcoming job cuts. Management must first consult employee representatives. However, he wanted to protect the areas of research and development. Despite the measures, the Nokia boss is sticking to the outlook for the full year. “We continue to believe in the medium to long-term market, but we will not wait and pray that the market will recover any time soon,” he said.
The crux of the matter is a lack of faster mid-band devices. Only a quarter of all 5G base stations outside of China currently have this technology. In order for the market to recover, the industry must invest in this area in order to be able to cope with the growing data traffic.
Analysts at Citi said that after Ericsson had already reported weak figures, the development at Nokia was not surprising in itself, but was in view of the extent of the deviation from expectations. Nokia shares were down almost 2 percent in early trading in Helsinki. For 2023, the Finnish telecom equipment supplier now expects that only the lower end of the sales forecast will be achieved. However, the comparable operating margin should reach the middle of the target range.