Nokia to axe up to 14,000 jobs to cut costs

In a move to cut costs, Finnish telecoms giant Nokia has announced plans to axe between 9,000 and 14,000 jobs by the end of 2026. This decision comes after the company reported a 20% drop in sales between July and September, citing slowing demand for 5G equipment in markets like North America. Nokia aims to reduce costs by €800m to €1.2bn by 2026, as customers continue to cut spending amidst high inflation and interest rates. Despite the uncertainty in the market, Nokia expects an improvement in its network business in the current quarter. While the company has not disclosed where the job cuts will occur, it assured that it would support affected employees and make careful considerations regarding the timing and details of the reductions.

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Nokia to axe up to 14,000 jobs to cut costs

Introduction

In an effort to reduce costs, Finnish telecoms giant Nokia has announced plans to cut between 9,000 and 14,000 jobs by the end of 2026. This decision comes after a significant drop in sales during the third quarter of the year, with a 20% decrease reported between July and September. Nokia attributes this decline to slowing demand for 5G equipment in key markets, such as North America. The company aims to cut costs by €800m to €1.2bn by 2026, with planned reductions of €400m in 2024 and €300m in 2025.

Background Information

Nokia’s decision to cut jobs is a direct response to the challenges it faces in the current market. The company reported a 20% decrease in sales between July and September, driven by slowing demand for 5G equipment. This decline is a result of customers cutting spending due to high inflation and interest rates. To address these challenges and ensure future growth, Nokia recognizes the need for significant investments in networks with improved capabilities. However, given the uncertain timing of the market recovery, the company has made the difficult decision to cut costs.

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Cost-Cutting Measures

Nokia’s goal is to cut costs by €800m to €1.2bn by 2026. In order to achieve these savings, the company plans to reduce costs by €400m in 2024 and €300m in 2025. These cost reductions will directly impact the number of jobs within the organization. Nokia aims to navigate the uncertain market conditions by acting quickly and implementing these cost-cutting measures. As part of this process, Nokia will engage in an employee consultation process to ensure transparency and fairness.

Job Cut Details

At this stage, there is no specific information on where the job cuts will fall within Nokia. The company has not provided details about the impact on UK employees, leaving some uncertainty surrounding their employment. Nokia intends to carefully consider the timing and details of the final job cuts, taking into account the evolving demands of the market. The company emphasizes that this process will be conducted after thorough consideration.

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Nokia’s History and Focus

Nokia, formerly the largest handset manufacturer in the world, underwent a significant transformation to focus on telecoms equipment. The shift in focus was driven by the failure to anticipate the rise of internet-enabled touchscreen phones from rivals such as Apple and Samsung. Since then, Nokia has specialized in software and hardware for telecoms infrastructure, including antennas and base stations. The company has also experienced growth as a major benefactor of the Huawei blockage in the UK’s 5G networks.

Challenges in the 5G Equipment Industry

The 5G equipment industry is currently facing challenges due to stalling demand in the US and EU markets. Operators in these regions have been cutting spending, affecting the sales of 5G equipment. Nokia has been trying to offset this weakness by increasing sales to India. However, even in India, the rollout of 5G has been slowing down. This situation mirrors the experience of Nokia’s Swedish rival, Ericsson, which also reported a fall in sales and implemented layoffs.

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Analyst’s Commentary on Telecoms Industry

Industry analysts have observed uncertainty and challenges in the telecoms industry as a whole. Questions have been raised about operators’ future relevance and their ability to navigate the changing landscape. The industry is facing decreased spending by both domestic and business customers, which has contributed to the challenges faced by companies such as Nokia. Despite these challenges, the demand for tech workers remains strong, indicating the resilience of the industry.

Tech Industry Job Cuts

Job cuts have been taking place across the tech industry, affecting various companies. Factors such as inflation, higher interest rates, and decreased spending by customers have led to redundancies. Even companies like Meta (Facebook and Instagram), Amazon, and X (formerly Twitter) have been impacted by this trend. However, it is worth noting that demand for tech workers remains high, with the majority of those who lost their jobs finding new employment within three months.

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Industry Impact and Similar Job Cuts

The challenges faced by the tech industry and the resulting job cuts can be attributed to economic factors and changing market dynamics. Nokia’s decision to cut jobs is not unique, as other companies like Meta and Amazon have also implemented similar measures. The industry as a whole is grappling with uncertainty, and it is important for companies to adapt and adjust their strategies to remain competitive.

Conclusion

Nokia’s decision to cut jobs is seen as a necessary step to address market uncertainty and ensure long-term profitability and competitiveness. The company acknowledges the difficult nature of this decision and is committed to supporting all affected employees throughout the process. The impact of Nokia’s job cuts extends beyond the company itself and reflects the challenges faced by the broader tech industry. It is crucial for the industry and its employees to adapt to the changing landscape and continue to drive innovation and growth.

Source: https://www.bbc.co.uk/news/business-67153676?at_medium=RSS&at_campaign=KARANGA