Nokia Corp.
NOK -1.16%
plans to cut between 5,000 and 10,000 jobs over the next two years, a move he said would make it more competitive in the 5G equipment market against rivals Huawei Technologies Co. and Ericsson AB.
The job cuts would reduce Finland’s current workforce of about 90,000 employees by as much as 11% and reduce its cost base by about $ 700 million, the company said Tuesday. They said the savings would be offset by more 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 once-controlled handset business, Nokia acquired French competitor Alcatel-Lucent to focus on manufacturing cellular antennas, internet routers and other telecommunications equipment. But it has lost ground for Huawei and Ericsson because of its efforts to introduce Alcatel-Lucent, as well as a blunder in getting computer chips that made its results more expensive and less desirable .
A man scans a QR code on a Nokia booth at Mobile World Congress in Shanghai in February.
Photo:
alex plavevski / Shutterstock
Nokia’s share of revenue in the telecom 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%. % in 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 being is a leader in 5G cell technology. The company said Tuesday it would streamline its product portfolio and continue to reduce costs. They plan to announce more details about his strategy on Thursday.
Part of Nokia’s challenges comes from the company erroneous 5G worldwide distribution. Wireless carriers started buying 5G equipment earlier than expected and Nokia had yet to get enough cheap and efficient computer chips to go into their cellular equipment. He had the competitors. As a result, Nokia’s products were more expensive and less power efficient than its competitors ’products.
In the US, Nokia last year lost a major 5G equipment contract with Verizon Communications Inc.
to Samsung Electronics Co.
It has not won any major cellular contracts in its long market in China, where Ericsson has become a major foreign supplier of 5G equipment.
Nordea analyst Sami Sarkamies said Nokia has a chance to be more competitive after the restructuring, especially as the U.S. campaign to ban Huawei has led to the industry leader losing market share outside China.
After missing out on the smartphone version, Nokia sold its mobile phone business to Microsoft for $ 7 billion in 2013. The company then decided to double down on the telecom equipment business. by purchasing Alcatel-Lucent for $ 17 billion in 2015, a move aimed at expanding its product offerings.
That was a mistake, analysts said. “Many of Nokia’s problems over the past few years stem from the Alcatel-Lucent deal,” 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 told its customers, who are wireless carriers, that it would replace Nokia gear with Alcatel-Lucent equipment.
The company has said that process took more time and money than expected. Instead of investing in research and development as Huawei and Ericsson did, Nokia had to focus on complex integration of two large companies Mr Sarkamies said.
Write to Stu Woo at [email protected]
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