Nokia?s 10K Job Cuts, Management Changes Needed To Restore Competitiveness

 
on June 14 2012 5:10 AM

Nokia Corp. (NYSE: NOK), the struggling smartphone maker, announced Thursday it will fire 10,000 workers, or 19 percent of its workforce, by the end of next year.

The move came  as part of another overhaul due to plummeting sales for the Espoo, Finland-based mobile phone maker, which has lost market share to its primary competitors Apple Inc. (NASDAQ: AAAPL) and Samsung Electronics (KOSPI: 005930).

Nokia's American Depositary Receipts fell as much as 16 percent to $2.30, a record low, before closing at $2.36, down 44 cents, on Thursday. The market capitalization of the company has fallen to $8.8 billion, a 62 percent drop over the past year.

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 CEO Stephen Elop, a former senior executive with Microsoft (Nasdaq: MSFT).

The total number of layoffs since 2010 is now 40,000

For the second time, Nokia also warned its second-quarter losses would exceed the first-quarter's loss of $1.2 billion. Moving from the Symbian operating system to Microsoft Windows will adversely affect third-quarter performance.

The restructuring includes shutting two research and development facilities, one in Ulm, Germany, and the other in Burnaby, Canada. A factory in Salo, Finland, will also be closed. The moves, including the layoffs, will save the company $2 billion by the end of 2013, Nokia said.

In addition, the company announced changes in its leadership. Executive vice-president and chief marketing officer Jerri DeVard, executive vice-president of mobile phones Mary McDowell and executive vice-president of market Niklas Savander will leave the company.

Nokia also announced Thursday it appointed Juha Putkiranta as executive vice president of operations; Timo Toikkanen as executive vice president of Mobile Phones; Chris Weber as executive vice president of sales and marketing; Tuula Rytila as senior vice president and chief marketing officer; and Susan Sheehan as senior vice president of communications. Putkiranta, Toikkanen and Weber also will join the Nokia leadership team on July 1.

Nokia, which was the world's largest vendor of mobile phones from 1998 to 2012, has seen its market share decline in the last five years.

Samsung Electronics overtook Nokia to become the world's largest maker of mobile phones, IDC reported. In the first quarter of 2012, Samsung shipped 93 million phones while Nokia sold only 83 million devices. Nokia's share price has slumped from $40 in 2007 to current levels.

In order to regain the lost market share, Nokia announced a strategic partnership with Microsoft in 2011. Based on this collaboration, Nokia launched Lumia smartphones with Microsoft's Windows Phone operating system incorporated in them.

However, even this alliance couldn't help Nokia much in making headway against Samsung and Apple. Apple sold 35.1 million iPhones in the first quarter while Nokia sold only 2 million Lumia smartphones. In the first quarter, handset shipments from Nokia fell 24 percent.

Share this article