Nokia plans to cut up to 14,000 jobs after sales and profits plunge in a weak market

The Finnish company said it’s trying ‘to navigate the current market uncertainty’. The mobile networks business declined 24%, driven mainly by weakness in the North American market

A man stands in Nokia headquarters in Espoo, Finland, October 19, 2023.LEHTIKUVA (via REUTERS)

Telecom gear maker Nokia said Thursday that it is planning to cut up to 14,000 jobs worldwide, or 16% of its workforce, as part of a push to reduce costs following a plunge in third-quarter sales and profit.

The Finnish company, one of the world’s main suppliers of high-speed 5G wireless networks, said it’s trying “to navigate the current market uncertainty” as higher interest rates take a toll.

The company said it is aiming to slash 800 million euros ($843 billion) to 1.2 billion euros in costs by the end of 2026. That is expected to lead to a reduction from 86,000 employees to between 72,000 and 77,000 over that time period.

Nokia’s third-quarter sales plummeted 20%, to 4.98 billion euros from 6.24 billion in the same three-month period last year. Comparable net profit plunged to 299 million euros in the July-to-September quarter from 551 million a year earlier.

The company’s biggest unit by revenue — the mobile networks business — declined 24% to 2.16 billion euros, driven mainly by weakness in the North American market. Operating profit for the division fell 64%.

“We continue to believe in the mid- to long-term attractiveness of our markets,” Nokia CEO Pekka Lundmark said in a statement. “Cloud computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities.”

The market weakness comes as telecom operators, Nokia’s main clients, put investments on hold because of higher interest rates and financial costs. Higher rates — enacted by central banks worldwide — combat inflation by making it more expensive for businesses to invest in equipment and more.

The issue is marketwide, Lundmark stressed, adding that Nokia’s competitors are facing a similar problem. The world’s other main suppliers of 5G broadband technology are Sweden’s Ericsson, China’s Huawei and South Korea’s Samsung. Ericsson said earlier this year that it was cutting 8% of its global workforce as it looked to reduce costs.

Rather than buying new, operators are using their existing stocks of network equipment like base stations that they hoarded due to a lack of components a few years ago, Lundmark said.

“Investments by operators have reduced remarkably,” Lundmark told reporters during a media briefing. “Perhaps the most serious situation prevails at the North American market, which has a very critical effect to our total profitability.”

Nokia’s sales in North America nosedived 45%, to 1.3 billion in the third quarter, from a year earlier. Even in India, a market that has seen substantial revenue growth in the past few years, the pace of 5G network rollouts — a main growth driver — has started to slow, Nokia said. “Cost-cutting is necessary so that we can secure our competitiveness and thus our future,” Lundmark said.

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