Nokia To Slash 10,000 Jobs, Shut Several Manufacturing Sites11:07 AM EST Thu. Jun. 14, 2012
Nokia said Wednesday it will cut up to 10,000 jobs through the end of 2013 and close several of its major manufacturing sites in an attempt to reduce operational expenditures and more aggressively compete in the global smartphone market.
The Finnish handset maker also lowered its second-quarter financial outlook for fiscal 2012 and revealed a series of executive-level moves, including the appointment of Juha Putkiranta, executive vice president of operations; Chris Weber, executive vice president of sales and marketing; Timo Toikkanen, executive vice president of mobile phones; and Tuula Rytila, senior vice president of marketing and chief marketing officer.
In addition, Nokia said it is consolidating its R&D and manufacturing operations, which will result in the closing of facilities in Ulm, Germany; Burnaby, Canada; and Salo, Finland.
"These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength," said Nokia CEO Stephen Elop in a statement. "We do not make plans that may impact our employees lightly, and as a company we will work tirelessly to ensure that those at risk are offered the support, options and advice necessary to find new opportunities."
Total headcount reductions are expected to save the company nearly $2 billion in operational expenses by the end of next year. The resulting restructuring charges, however, may be as high as $1.2 billion, according to a Nokia release.
Looking ahead, Nokia said it plans to broaden the price range of its new Windows Phone-based Lumia smartphones and continue to distinguish the devices in the market with the use of new materials and technologies. One of these new technologies will be location-based services, including more robust navigation and visual search applications.
To do this, Nokia also revealed Wednesday the acquisition of IP patents from Swedish mobile imaging vendor Scalado. The price of the deal was not disclosed.
The company expects its financial woes to continue into both its second and third fiscal quarters. Specifically, it projects its Smart Devices unit to take a hit due to competition in the smartphone market that has reached a “greater extent than previously expected,” according to the release.
Nokia is also bracing for a hit to its Devices and Services segment, anticipating its operating margin to be lower than it was last quarter, when it announced a loss of $1.8 billion.
As Nokia's profits continue to slide and it struggles to fight back against mobile giants Apple and Google, reports of a potential buyout started to surface this week, with Microsoft and Samsung being pegged as the most likely contenders.
But according to Julian Jest, research analyst at Informa Telecoms and Media, a buyout may actually still be in the cards for former industry leader Nokia.
"Despite the backing from Microsoft to implement the Windows Phone OS, Nokia's revenue has been on the decline and their credit rating cut," Jest said in a stament. "Nokia has an excellent history of producing attractive, well built handsets, including the current crop of Lumia devices. As a result they are prime targets for a takeover bid."