Nokia Corp.
NOK -0.35%
plans to cut between 5,000 and 10,000 jobs over the next two years, a move that would make it more competitive in the 5G equipment market compared to rivals Huawei Technologies Co. and Ericsson AB.
Job cuts would reduce the Finnish company’s current workforce of around 90,000 workers by up to 11% and reduce its cost base by about $ 700 million, the company said on Tuesday. He said the economy would offset the increase in 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-dominant cell phone business, Nokia acquired French rival Alcatel-Lucent to focus on manufacturing cell phone antennas, internet routers and other telecommunications equipment. But it lost ground to Huawei and Ericsson because of their struggles to integrate Alcatel-Lucent, as well as because of a mistake made in the acquisition of computer chips that made their products more expensive and less desirable.
A man reads a QR code at Nokia’s booth at the Mobile World Congress in Shanghai in February.
Photograph:
alex plavevski / Shutterstock
Nokia’s share of revenue in the total telecommunications equipment market fell from 16% in 2019 to 15% last year, according to research firm Dell’Oro Group, while Huawei increased its lead from 28% to 31% in the same period.
Last year, Nokia replaced Chief Executive Rajeev Suri with Pekka Lundmark, who said the company would abandon its previous plan to offer a range of products to focus on becoming a leader in 5G mobile technology. The company said Tuesday that it would streamline its product portfolio and continue to cut costs. She plans to announce more details about her strategy on Thursday.
Part of Nokia’s challenges comes from the fact that the company does not calculate the launch of 5G worldwide. Mobile operators have started buying 5G equipment ahead of schedule and Nokia has yet to guarantee computer chips that are cheap and efficient enough to get into their cell phone equipment. Your rivals do. As a result, Nokia’s products were more expensive and less energy efficient than those of its competitors.
In the United States, Nokia last year lost a major 5G equipment contract with Verizon Communications Inc.
for Samsung Electronics Co.
It has not won any major cell phone contracts in its long-standing China market, where Ericsson has become the leading foreign supplier of 5G equipment.
Nordea analyst Sami Sarkamies said Nokia has a chance to become more competitive after the restructuring, especially as the U.S. campaign to contain Huawei has resulted in the loss of market share of the industry leader outside China.
After losing the smartphone revolution, Nokia sold its cell phone business to Microsoft for $ 7 billion in 2013. The company then decided to double its remaining telecommunications equipment business by buying Alcatel-Lucent for $ 17 billion in 2015, a movement that aims to expand its product offerings.
That turned out to be a mistake, analysts said. “Many of the problems Nokia has faced in recent years stem from the Alcatel-Lucent agreement,” said Sarkamies.
The deal left Nokia with two sets of equipment: one from the Nokia brand and the other from the Alcatel-Lucent brand. Nokia told its customers, who are mobile operators, that it would replace Alcatel-Lucent equipment with Nokia equipment.
The company said the process took more time and money than anticipated. Instead of investing in research and development as Huawei and Ericsson did, Nokia had to focus on a complex integration of two large companies, said Sarkamies.
Write to Stu Woo at [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8