Nokia (NYSE:NOK) said it would cut an additional 10,000 jobs by the end of 2013 and it lowered its outlook for the second quarter. The actions are CEO Stephen Elop's latest attempt to turn around the struggling company as it embraces Microsoft's (NASDAQ:MSFT) Windows Phone platform.
The company also made other sweeping changes: It announced a shake-up of its management team, the acquisition of employees, technology and intellectual property from imaging firm Scalado, and a long-expected divestment of its luxury mobile phone unit Vertu, which recent reports suggested could net Nokia around $251 million.
However, the biggest changes will be to Nokia's workforce, as the new cuts will shed one in five Nokia workers worldwide. Nokia said it will reduce research and development projects, resulting in the closure of its facilities in Ulm, Germany and Burnaby, Canada. The company also said it plans to consolidate certain factories, resulting in the closure of its manufacturing facility in Salo, Finland, though research and development efforts in Salo will continue. The company also said it will refocus its marketing and sales efforts, streamline IT and corporate functions and cut non-core assets.
Nokia already cut 14,000 jobs last year as part of a plan to cut $1.3 billion from its operating costs by 2013. Nokia said in April that it would accelerate and substantially deepen cost savings for its Devices & Services unit, but did not provide specifics at the time.
The Finnish handset giant said that the new cuts will mean that Nokia will reduce its operating expenses by an annualized rate of $3.77 billion by the end of 2013. Overall the new cuts amount to around $2 billion in savings.
Nokia's fortunes have been declining due to slowing sales of its feature phones and Symbian smartphones. Sales of Nokia's Lumia Windows Phone smartphones, which Nokia began selling in November, haven't compensated. However, Nokia recently introduced a new range of models, including updates to its low-cost Asha line, to try to strengthen its hand in emerging markets.
On a conference call with financial analysts, Elop said the company will introduce more Lumia models in a broader range of price points, including models cheaper than the Lumia 610. The 610 is currently Nokia's cheapest Lumia at $255 before taxes and subsidies. He said Nokia is receiving specific engineering and other support from Microsoft to make that happen, though he declined to give details.
Elop also said that he is proud of the work Nokia has done on the Lumia line to differentiate its products, but that the company has had difficulty breaking through with its marketing at the retail sales level. Therefore, he said, Nokia will concentrate on those areas, as well as markets--such as the United States, China, the United Kingdom and other European markets--where it feels it should invest the most resources. Elop acknowledged Nokia will "concentrate on some markets at the expense of others."
Nokia also lowered its outlook for the second quarter and predicted a larger operating loss. Nokia said "competitive industry dynamics are negatively affecting the Smart Devices business unit to a somewhat greater extent than previously expected" and that this would likely continue in the third quarter. The company said it now expects its non-IFRS Devices & Services operating margin in the second quarter to be below the first quarter 2012 level of -3 percent.
In addition to the job cuts, Nokia made a series of executive changes. Nokia named Juha Putkiranta as executive vice president of operations; Timo Toikkanen as executive vice president of Mobile Phones, Chris Weber as executive vice president of sales and marketing; Tuula Rytila as senior vice president and chief marketing officer; and Susan Sheehan as senior vice president of communications.
Formerly, Putkiranta was senior vice president of supply chain; Toikkanen was vice president of business development, programs and special projects; and Weber was the senior vice president in charge of the Americas for Nokia. Weber has been key in spearheading Nokia's bid to re-enter the U.S. market with its Lumia phones. Nokia did not announce a new head of the Americas region.
Effective June 30, three top executives will be leaving the company, Nokia said. They include, Niklas Savander, who had been executive vice president of Markets and had been with Nokia since 1997; Mary McDowell, who had been executive vice president of Mobile Phones and had been with Nokia since 2004; and Jerri DeVard, who had been executive vice president and chief marketing officer, and had been with Nokia for a year and a half.
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