Nokia to Cut 3,500 Jobs; Close Romania Factory

Struggling Finnish-based Nokia (NYSE: NOK) said it will eliminate another 3,500 jobs and close a factory in Cluj, Romania, in connection with its ongoing restructuring program.

The company also said it will shut down its locations and commerce development) operations in Bonn, Germany and Malvern, U.S. by the end of next year.

The manufacturing facilities in Cluj, which made low-end feature phones instead of smartphones, will now be transferred to Asia where such phones remain popular.

“The European market has shifted towards smartphones, whereas the feature phone market is predominant in Asia and we can get greater scale and proximity benefits by using our Asian factories in China and Korea,” said Nokia.

The company also said it will review its plans for factories in Finland, Hungary and Mexico.

“We must take painful, yet necessary, steps to align our workforce and operations with our path forward,” said chief executive Stephen Elop.
“With these changes we will emerge as a more dynamic, nimble and efficient challenger.”

In April of this year, the company announced it would cut 7.000 jobs worldwide as part of a plan to reduce costs by 1-billion euros.

Nokia shares have plunged almost 49 percent year-to-date.

Nokia’s sales and margins are falling, partially due to its failure to make inroads in the Smartphone business, particularly against Apple Inc.’s iPhone and the mobile devices that use Google’s Android system.

In the second quarter of 2011, the company posted a net loss of $521-million, versus a profit of $307-million in the year-ago period, while net sales dropped by 7 percent.

Geoff Blaber, analyst at CCS Insight, told BBC: The scaling back of its manufacturing presence was sadly inevitable but it's clear that Elop is not afraid of taking the tough decisions to ensure Nokia's long-term survival.

Meanwhile, according to a report in the Financial Times newspaper, Nokia is seeking to reverse its decline by developing new phones that will use Microsoft’s Windows Phone operating system rather than the company’s own Symbian system.

However, FT cautioned that it might take another year and half before Nokia’s Microsoft phone would be available on the market.