STOCKHOLM (Reuters) – Nokia on Tuesday announced plans to cut up to 10,000 jobs within two years to cut costs and invest more in research capabilities, while the Finnish telecommunications group seeks to increase its challenge for Sweden’s Ericsson and China. Huawei.
After taking over the top job last year, Chief Executive Pekka Lundmark has made changes to recover from product errors under the company’s previous management that undermined its 5G ambitions and dragged its stock.
He announced a new strategy in October, according to which Nokia will have four business groups and said the company “will do whatever it takes” to take the lead in 5G, as it also bets on capturing Huawei’s stake.
Lundmark is expected to present its long-term strategy, discuss action plans and set financial goals during the company’s capital market day on Thursday.
The company said in a statement that it expects about 600 million euros ($ 715 million) to 700 million euros of restructuring and associated charges by 2023.
“Decisions that may have a potential impact on our employees are never made lightly,” said Lundmark in a statement. “My priority is to ensure that everyone affected is supported through this process.”
Nokia currently has 90,000 employees and has cut thousands of jobs after the acquisition of Alcatel-Lucent in 2016.
She expects the current restructuring to lower her cost base by around 600 million euros by the end of 2023. Half of the savings are expected to be realized in 2021.
“These plans are global and are likely to affect most countries,” said a Nokia representative. “In Europe, we have just informed the local works councils and we hope that the consultation processes will start soon, when applicable.”
France, where Nokia cut more than 1,000 jobs last year, has been excluded from the current restructuring.
The savings program is bigger than expected, but what’s interesting is that it won’t actually result in lower costs, said Sami Sarkamies, an analyst at Nordea.
“The company is shifting its focus from general costs to research and development, which should result in growth and better margins in the future,” he said.
Nokia plans to increase investments in research and development and future capabilities, including 5G, cloud and digital infrastructure.
Under Lundmark’s predecessor, Nokia reduced its profit outlook and suspended dividend payments after errors in the product dropped more than a fifth of its market value.
In February, Nokia predicted that 2021 revenue would drop to 20.6-21.8 billion euros ($ 25-26 billion) from 21.9 billion euros in 2020.
Although Nokia and Ericsson have won more customers as more telecommunications operators start rolling out 5G networks, the Swedish company has an advantage in part because it has won 5G radio contracts in China.
Nokia did not win a 5G radio contract in China and also lost to Samsung Electronics in part of a 5G equipment supply contract for Verizon.
Nokia shares fell marginally in the morning trading.
($ 1 = 0.8389 euros)
Reporting by Supantha Mukherjee in Stockholm and Essi Lehto in Helsinki; edition of Niklas Pollard and David Evans