Nokia Oyj cut its earnings forecast for the second time this year and said it will reduce as many as 10,000 jobs and shut production and research sites in Chief Executive Officer (CEO) Stephen Elop’s biggest overhaul.
The stock fell to the lowest since 1996, pushing Nokia’s market value below $10 billion. As part of the changes, sites in Finland, Germany and Canada will be closed and executives Niklas Savander, Mary McDowell and Jerri DeVard will leave, Espoo, Finland-based Nokia said on Thursday.
Elop, who took over as CEO in 2010, is reorganising Nokia after market-share gains by Apple’s iPhone and Samsung Electronics’ devices led to a slump in sales and four straight quarterly losses.
| NOKIA'S ROCKY ROAD UNDER CHIEF EXECUTIVE STEPHEN ELOP Nokia said on Thursday it would cut 10,000 more jobs and sell its luxury handset unit Vertu, its latest move to slash costs as it loses market share and burns through cash |
| The following are key events since Chief Executive Stephen Elop took over in September 2010: |
| Feb 2011 |
| Nokia announces it is teaming up with Microsoft Corp for its new smartphones and dumping its own Symbian platform |
| Apr 2011 |
| Nokia says it will axe 7,000 jobs and outsource its Symbian software development unit to cut euro 1 billion in costs |
| Sep 2011 |
| Nokia says it will close its plant in Romania — slashing 2,200 jobs — and cut 1,300 jobs in its location and commerce business unit |
| Oct 2011 |
| Nokia unveils two sleek new Microsoft Windows phones in time for Christmas |
| Nov 2011 |
| Nokia Siemens Networks, Nokia’s network equipment joint venture with Siemens, announces it will cut 17,000 jobs, nearly a quarter of its workforce |
| Feb 2012 |
| Nokia unveils a plan to cut 4,000 more jobs at its plants in Finland, Hungary and Mexico as it moves smartphone assembly work to Asia |
| Jun 2012 |
| Plans to cut another 10,000 jobs globally. Warns second-quarter loss from its cellphone business will be larger than expected Sells its luxury handset unit Vertu to EQT VI, a European private equity firm, for an undisclosed sum |
| Source: Reuters |
Nokia said the second-quarter adjusted operating margin at the devices unit will be worse than a loss equivalent to three per cent of revenue in the first quarter. Nokia had projected margins to be “similar to or below” the first-quarter level.
Nokia fell as much as 12 per cent to euro 1.96 and traded at euro 1.97. It had declined 49 per cent in the past year through yesterday. The company has a market value of euro 7.4 billion ($9.3 billion), down from a peak of more than euro 300 billion in 2000.
The job cuts, 3,700 of which will take place in Finland, amount to almost a fifth of the total excluding a joint venture with Siemens, Elop had already announced more than 10,000 job cuts across the company. He said in April that Nokia would speed up a cost-cut programme and take further actions if needed.
“We must reshape our operating model and ensure that we create a structure that can support our competitive ambitions,” Elop said.
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India impact
A Nokia India spokesperson said, “Today’s planned changes will impact employees throughout our operations globally. While we anticipate impacts at other sites, we don’t see significant impact on India operations. Having said that, we have no specifics to provide at this stage.” Nokia has 11,000 employees in India. Nokia has lost more than euro 70 billion in market value since Apple introduced the iPhone in 2007.
Savings Target
To challenge Apple and handset makers using Google’s Android software, Elop adopted Microsoft’s Windows Phone, abandoning Nokia’s home-grown Symbian operating system. Nokia shipped more than 2 million Lumia smartphones running on Windows Phone last quarter, while Apple sold 35.1 million iPhones.
Nokia’s total handset shipments declined 24 per cent in the first quarter, allowing Samsung to overtake the company as the world’s biggest mobile-phone maker. Nokia’s operating margin for mobile phones plunged to 3.7 per cent last year, from more than 20 per cent before Apple introduced the iPhone in 2007. The company targets additional savings of about euro 1.6 billion, aiming to bring annual expenses at its devices business to about euro 3 billion by the end of 2013. That’s down from euro 5.35 billion in 2010.
The company will close a manufacturing plant in Salo, Finland, and facilities in Ulm, Germany, and Burnaby, British Columbia.
New Team
Elop promoted Timo Toikkanen, Nokia’s head of business development, to take over from McDowell as executive vice-president for low-end phones. Tuula Rytilae will become chief marketing officer, replacing DeVard. Savander’s title was executive vice-president of markets. The company also agreed to sell its Vertu luxury-phone unit to Swedish private-equity firm EQT Partners AB. The companies were discussing a deal at about euro 200 million, people with knowledge of the matter had said earlier.
Nokia had 53,553 workers at the end of March, excluding the network-gear joint venture with Siemens. Including Nokia Siemens Networks, the company employed 122,148 people, down 6.7 per cent from a year earlier. Nokia Siemens, which also is struggling to return to profit, is cutting 17,000 jobs worldwide to save euro 1 billion in annual operating expenses and production costs by 2013.