• The job losses will primarily impact R&D divisions segments in Paris-Saclay and Lannion
  • Nokia had acquired Alcatel Lucent in 2016 for $17.7 billion
  • But Nokia’s three French affiliate companies will not be affected by the layoffs.

Finnish telecom equipment maker Nokia (NOK) plans to cut 1,233 jobs at its French subsidiary Alcatel-Lucent International -- representing about one-third of its local workforce, due to rising cost pressures.

The job losses will primarily impact the research and development divisions segments at Nokia’s sites in Paris-Saclay and Lannion.

“With a focus on cost continuing to be essential with the industry, Nokia has announced a project to streamline its activities in France,” Nokia stated. “The aim is to achieve a best-in-class operating model globally, increase R&D productivity and agility to strengthen the company’s competitive position and secure long-term performance.”

But Nokia’s three French affiliate companies, Radio Frequency Systems; Nokia Bell Labs France; and Alcatel Submarine Networks will not be affected by the layoffs.

Nokia originally announced a global cost savings plan in October 2018. In April the company said it sought t0 cut costs by 500 million euros ($560 million) by the end of this year.

“Implementation [of the cost-cutting program] already started in some countries and the project is now impacting Nokia’s operations in France,” a Nokia representative said.

Thierry Boisnon, president of Nokia in France, insisted Nokia will still continue to serve as a source of jobs in France.

“Nokia will continue to be a major employer in France with a strong foothold in R&D, sales and services, which will enable us to develop and execute our customers’ projects efficiently,” he said.

Nokia employs 5,138 people in France, including 3,640 at Alcatel Lucent.

Nokia had acquired Alcatel Lucent in 2016 for around €15.6 billion ($17.7 billion) and vowed to French regulators at the time that it would maintain jobs and expand R&D in France.

Now unions have condemned Nokia for going back on its promises.

France’s CFE-CGC workers union said: “It’s just a low-cost strategy that is being implemented, contrary to all the commitments made by Nokia in France. Nokia is laughing at everyone, first and foremost the French government.”

But a Nokia spokesman said the company became free of such commitments this month.

“Nokia must improve this job cuts plan really significantly,” warned an official at the French finance ministry.

The original merger agreement between Nokia and Alcatel Lucent was closely examined by then economy minister Emmanuel Macron, who is now the president of France.

Nokia Chief Executive Officer Rajeev Suri, who will step down this year, has indicated that efforts to merge with Alcatel Lucent had likely hindered Nokia plans to launch 5G network products.

Seeking Alpha is very positive on Nokia, citing that increased 5G adoption will drive revenues while profitability will increase due to advances in its software technology.

Nokia is “one of the main players in the 5G space and will surely benefit from its increased adoption,” Seeking Alpha noted. “Not only will this be a tailwind for revenue growth, but I also expect Nokia to improve its profitability and start generating a lot more cash in the next two years.

Nokia is rated a “strong buy” by Seeking Alpha, with a price target of $8 over the next two years. (Shares currently sell at about $4.35)