Nokia To Cut 10,000 Jobs As Elop Tries To Stanch Losses

Nokia To Cut 10,000 Jobs As Elop Tries To Stanch LossesGoogle +1

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Nokia to Cut Up to 10,000 Jobs to Halt Losses

Nokia Oyj (NOK1V) cut its earnings forecast for this quarter and said it will eliminate as many as 10,000 jobs and shut production and research sites in three countries in Chief Executive Officer Stephen Elop’s biggest overhaul.

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Nokia began selling its first handsets running Microsoft Corp.’s Windows Phone software in the fourth quarter to stop consumers switching to Apple Inc.’s iPhone and devices running Google Inc.’s Android operating system. Photographer: Ville Mannikko/Bloomberg

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Nokia had 53,553 workers at the end of March, excluding the network-gear joint venture with Siemens. Photographer: Tomi Setala/Bloomberg

Nokia shares fell to the lowest since 1996 after the company said handset losses will widen. As part of the changes, sites in Finland, Germany and Canada will be closed and executives Niklas Savander, Mary McDowell and Jerri DeVard will leave, Espoo, Finland-based Nokia said today.

Elop, who took over as CEO in 2010, is reorganizing Nokia after market-share gains by Apple Inc.’s iPhone and Samsung Electronics Co. devices led to a slump in sales and four straight quarterly losses. Nokia’s handset shipments declined24 percent in the first quarter, allowing Samsung to overtake the company as the world’s biggest mobile-phone maker.

“We don’t have Nokia returning to profitability devices in the foreseeable future, not this year and not next,” said Alexander Peterc, an analyst at Exane BNP Paribas in London with an underperform rating on the stock. “They can’t continue like this.”

Nokia said second-quarter adjusted operating margins at the devices unit will be worse than a loss equivalent to 3 percent of revenue in the first quarter. Nokia had projected margins to be “similar to or below” the first-quarter level.

Nokia fell as much as 10 percent to 2 euros and traded at 2.10 euros at 10:38 a.m. Helsinki time. It had declined 49 percent in the past 12 months through yesterday.

IPhone Challenge

The job cuts amount to almost a fifth of the total excluding a joint venture with Siemens AG. (SIE) Elop had already announced more than 10,000 job cuts across the company. He said in April that Nokia would speed up its cost-cutting program and take further actions if needed.

“We must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions,” Elop said in today’s statement.

Nokia has lost more than 70 billion euros ($88 billion) in market value since Apple introduced the iPhone in 2007, taking the lead in smartphone innovation. To challenge Apple and handset makers using Google Inc.’s Android software, Elop adopted Microsoft’s Windows Phone, abandoning Nokia’s homegrown Symbian operating system.

Nokia shipped more than 2 million Lumia smartphones running Windows Phone in the first quarter, while Apple sold 35.1 million iPhones. Nokia’s operating margin for mobile phones plunged to 3.7 percent last year from more than 20 percent before Apple introduced the iPhone in 2007.

Savings Target

The cuts are are aimed at accelerating Nokia’s cost- reduction efforts. The company now targets additional savings of about 1.6 billion euros, aiming to bring annual expenses at its devices business to about 3 billion euros. That’s down from 5.35 billion euros in 2010.

The company will close a manufacturing plant in Salo, Finland, and facilities in Ulm, Germany, and Burnaby, Canada. The cuts and closures will result in new expenses of about 1 billion euros, Nokia said.

The company also agreed to sell its Vertu luxury-phone unit to Swedish private-equity firm EQT Partners AB, without disclosing terms. The companies were discussing for a deal at about 200 million euros, people with knowledge of the matter said earlier this week.

Nokia had 53,553 workers at the end of March, excluding the network-gear joint venture with Siemens. Including Nokia Siemens Networks, the company employed 122,148 people, down 6.7 percent from a year earlier.

Nokia Siemens, which also is struggling to return to profit, is cutting 17,000 jobs worldwide to save 1 billion euros in annual operating expenses and production costs by 2013.