Nokia has revealed plans to cut up to 14,000 jobs. This workforce reduction, amounting to approximately 16% of its global employees, is part of a broader cost-cutting initiative. The announcement comes because of company’s disappointing third-quarter financial results.
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The decision to decrease the workforce shows up amidst what Nokia portrays as a “weaker” market environment.
The organization has for some time been a vital player in the telecommunications sector, particularly in the development and deployment of 5G technology.
However, recent challenges have led to a reevaluation of its operations. In the third quarter, Nokia reported a 15% decline in sales compared to the same period the previous year.
This drop in revenue is attributed to macroeconomic uncertainties and higher interest rates, which have placed considerable pressure on operator spending.
The mobile network sales segment took a significant hit, falling by 19% in the same quarter. One of the main contributing factors to this decline was the slowdown in the pace of 5G deployment, particularly in markets like India.
5G technology is the fifth generation of mobile internet, promising faster data speeds, lower latency, and greater connectivity.
Nokia, alongside competitors like Ericsson and Huawei, has been actively involved in the development and deployment of 5G networks globally. However, in spite of its true capacity, the rollout of 5G has confronted several difficulties.
In the case of Nokia, the slowdown in 5G deployment has resulted in reduced sales volumes, particularly in crucial markets.
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While 5G deployment has been promising, various factors have hindered its progress. This includes the uncertainties related to market demand and external factors like economic instability and interest rates.
Ericsson, a significant contender to Nokia, likewise revealed battles in a similar period, refering to a difficult climate and macroeconomic vulnerability.
These simultaneous issues are characteristic of the more extensive troubles looked by the broadcast communications gear industry.
The Company’s decision to cut its workforce is part of a broader effort to reduce costs. The company aims to lower its cost base by €800 million to €1.2 billion by the end of 2026.
This cost reduction plan is expected to lead to a reduction in the number of employees from 86,000 to a range between 72,000 and 77,000.
Nokia has expressed its intention to act quickly to realize these cost savings. The company plans to reduce costs by €400 million in 2024 and an additional €300 million in 2025.
The specifics of where these job cuts will take place have not been disclosed, creating a level of uncertainty among the affected employees.
The timing and details of the final job cuts will be determined after careful consideration and an evaluation of market demand.
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While Nokia’s cost-cutting measures are expected to lead to substantial savings, these moves are not without consequences.
Workforce reductions of this magnitude are always challenging and can be emotionally and financially impactful for the employees affected.
CEO Pekka Lundmark acknowledges the difficulty of such decisions, stating, “The most difficult business decisions to make are the ones that impact our people.” The company has accentuated its commitment to supporting employees affected by the process.
It is initiating a consultation process on the initial reductions and will make efforts to assist and provide resources to those affected. This includes retraining and helping employees transition to new opportunities.
Regardless of the difficulties and vulnerabilities looked by Nokia and the media communications industry at large, the organization stays hopeful about what’s in store. Nokia keeps on putting stock in the mid to long-term attractiveness of its markets.
Pekka Lundmark, Nokia’s CEO, emphasized that data traffic growth continues and the 5G rollout is still in its early stages, with room for growth.
He also pointed out that cloud computing and artificial intelligence (AI) revolutions are dependent on substantial investments in networks with enhanced capabilities.
Moreover, Nokia has maintained its outlook for 2023, forecasting between €23.2 billion and €24.6 billion in sales for the full year.
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