Nokia expects to cut 5,000 to 10,000 jobs within the next two years, or up to around 11% of its workforce, as the Finnish vendor looks to reduce costs while investing more in R&D and 5G.
In an announcement Tuesday Nokia said it expects to lower annual costs by EUR 600 million ($714 million) by the end of 2023. During the 18- to 24-month timeframe its employee base will shrink from 90,000 currently to between 80,000-85,000.
Increased investments in R&D and capabilities like 5G, cloud and digital infrastructure, as well as costs for salary inflation, will offset savings. It hasn’t changed Nokia’s outlook for 2021.
“Additional long-term benefits that Nokia will action include streamlining its portfolio and reducing site fragmentation,” according to Nokia’s announcement.
The plan relates to broader turnaround efforts by CEO Pekka Lundmark, which have included leadership changes and condensing into four business groups as the vendor shifts away from an end-to-end strategy in favor of a more focused approach. Nokia has cited turning around its new Mobile Networks group as a top priority for 2021.
“Nokia now has four fully accountable business groups. Each of them has identified a clear path to sustainable, profitable growth and they are resetting their cost bases to invest in their future,” Lundmark said in a statement Tuesday.
Even before he took the helm this past August, job cuts were part of the picture under former Nokia boss Rajeev Suri. Earlier this month, LightReading reported that Nokia had cut around 11,000 jobs since 2019 for annual savings of EUR 500 million.
Nokia is taking steps to reclaim its game in 5G, after stumbles over the last couple of years. In 2020, Nokia lost share in North America after failing to secure a large 5G contract with Verizon, though still counts the carrier among its top three customers. It also missed out on 5G radio access network (RAN) deals in China, with the bulk going to Huawei and ZTE, and rival Ericsson scooping up the remainder.
Nokia maintained its spot among the three dominant RAN vendors in 2020, improving RAN revenue shares outside of China, but still behind Ericsson, according to Dell’Oro Group. China's Huawei remained in first position for the global RAN market.
In October Lundmark said Nokia had decided to “invest whatever it takes to win in 5G.” He echoed the sentiment of reclaiming leadership in today’s announcement.
“Each business group will aim for technology leadership. In those areas where we choose to compete, we will play to win. We are therefore enhancing product quality and cost competitiveness, and investing in the right skills and capabilities,” Lundmark stated.
Of the four groups, Nokia cited actions for Mobile Networks, including scaling back investment in mature or declining parts of its portfolio and pouring more into 5G R&D, while cutting out overlapping activities and reducing site fragmentation.
The Cloud and Network Services segment is realigning the portfolio to fit customers’ that are moving away from owning products in favor of as-a-service cloud offerings.
Just yesterday, Nokia announced partnerships with major cloud players AWS, Google, and Microsoft, pairing its radio and private network solutions.
Nokia is hosting a Capital Markets Day on March 18, when groups will provide detailed updates on strategy and financial outlooks.