Nokia to slash 7,000 jobs

Nokia HQ 2

HELSINKI: Nokia Corp will slash 7,000 jobs worldwide, through both layoffs and outsourcing, as it strives to cut costs and catch up with its top rivals in the smartphone market.

Most of the 4,000 layoffs, due by the end of next year, will be in Denmark, Finland and Britain, Nokia said.

It also plans to transfer 3,000 workers in China, Finland, India, Britain and the United States to Accenture PLC as it outsources Symbian platform operations to the global management-consulting firm, in a major shift of strategy.

The announcements came as the world’s top cellphone maker seeks to cut operating expenses by 1bil euro (RM5bil) by 2013 amid fierce competition that has seen its market share plunge and profits plummet.

Markets had been eagerly expecting signals about company policy from new CEO Stephen Elop since he took over in September.

Even more they awaited word on strategy decisions since the Feb 11 announcement that Nokia and Microsoft Corp were teaming up to challenge rivals such as Research in Motion, Apple Inc and Google Inc.

“At Nokia, we have new clarity around our path forward, which is focused on our leadership across smart devices, mobile phones and future disruptions,” Elop said on Wednesday.

The announcements came as Nokia organised company briefings for thousands of personnel in several cities in Finland, where it has 13,000 employees but indirectly provides work for more than 20,000 people.

Elop said that none of the employees will lose their jobs this year, and that the personnel transfers would be made “over time,” describing the decisions as “absolutely necessary” to get the company back on track.

“We have to realign our work force with the needs of our business,” Elop told Finnish broadcaster YLE, saying that Nokia had tried hard to minimise the impact of the job cuts.

“For example, by doing the relationship with Accenture, we’re making sure that quite a number of Nokia employees will have continued employment,” he said.

Neil Mawston from Strategy Analytics market research said Nokia’s decisions were “sensible” as it struggles against rivals.

“Profits are coming down, volume is less and shipments are less strong than they were, so it makes sense to right-size the cost base a little bit,” Mawston. “The job cuts aren’t as bad as they have been for some rivals.”

Under siege

Recently, Nokia has faced stiff competition from Research in Motion’s Blackberry, Apple’s iPhone and Google’s Android at the top end of the market, as well as feeling the pinch from numerous Asian handset makers that produce cheaper phones in emerging markets.

Nokia has been the world’s largest mobile phone maker since 1998, selling 432 million devices last year — more than its three closest rivals combined.

But its market share continues to fall, to 29% in this year’s first quarter — its lowest level since the late 1990s.

Even more damaging has been Nokia’s inability to meet modern challenges of the smartphone market — the lucrative sector in the handset industry — where Nokia used to be the leading innovator.

Although Nokia sold 24 million smartphones in the first quarter — 13% more than in 2010 — its market share for the devices plunged to 24% from 39% a year earlier, according to Strategy Analytics.

The research firm also said that Apple had overtaken Nokia as the world’s largest handset vendor in revenue terms during the period, reaching sales of US$11.9bil (RM36bil) on shipments of 18.6 million devices against Nokia’s revenue of US$9.4bil (RM30.1bil) on shipments of 108.5 million units.

Today, the iPhone has set the standard for smartphones while BlackBerrys have become the favourite of the corporate set. And on the software front, Android has emerged as the top choice for phone makers that want to challenge the iPhone.

Mawston said that Nokia’s future depends much on the success of its partnership with Microsoft and the type of phone they launch, expected late this year or in 2012.

“If it’s a killer device then these job cuts will be long forgotten, and Nokia will be back in an upward movement,” Mawston said. “If it’s anything less than perfect, then it will be bad.”

The Espoo-based company, near Helsinki, employs 132,500 people — 7% more than a year ago. — AP

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