Nokia Corp.
ENOUGH -0.88%
plans to cut between 5,000 and 10,000 jobs over the next two years, a move he believes would make it more competitive in the 5G equipment market against rivals Huawei Technologies Co. and Ericsson AB.
The job cuts would cut the Finnish company’s current workforce of about 90,000 employees by as much as 11% and cut its cost base by about $ 700 million, the company said Tuesday. It said the savings would offset increased investment in research and development, among other things.
Nokia is in the early stages of its second major restructuring program in less than a decade. After selling its once dominant handset business, Nokia acquired French rival Alcatel-Lucent to focus on making mobile antennas, Internet routers and other telecommunications equipment. But it has lost ground to Huawei and Ericsson due to its struggles to integrate Alcatel-Lucent, as well as a gaffe in purchasing computer chips that made its products more expensive and less desirable.
A man scans a QR code on the Nokia booth at Mobile World Congress in Shanghai in February.
Photo:
alex plavevski / Shutterstock
Nokia’s revenue share in the total telecom equipment market fell from 16% in 2019 to 15% last year, according to research firm Dell’Oro Group, while Huawei increased its lead from 28% to 31% over the same period.
Last year, Nokia replaced Chief Executive Rajeev Suri with Pekka Lundmark, who said the company would withdraw from its previous plan to offer a range of products to focus on becoming a leader in 5G cellular technology. The company said Tuesday it would streamline its product portfolio and continue to reduce costs. It plans to reveal more details about its strategy on Thursday.
Part of Nokia’s challenges stems from the company misjudging 5G deployments around the world. Wireless carriers started purchasing 5G equipment earlier than expected, and Nokia had not yet secured enough cheap, efficient computer chips to use in its mobile devices. His rivals had. As a result, Nokia’s products were more expensive and less energy efficient than those of its competitors.
In the US, Nokia lost a major contract for 5G equipment with Verizon Communications last year Inc.
at Samsung Electronics Co.
It has failed to win major mobile contracts in its old market in China, where Ericsson has become the leading foreign supplier of 5G equipment.
Nordea analyst Sami Sarkamies said Nokia has a chance to become more competitive after the restructuring, especially as the US campaign to curb Huawei has caused the market leader outside of China to lose market share.
After missing the smartphone revolution, Nokia sold its mobile phone business to Microsoft for $ 7 billion in 2013. The company then decided to double its remaining telecom equipment business by buying Alcatel-Lucent for $ 17 billion in 2015, broadening its product offering.
That turned out to be a mistake, analysts said. “Many of the problems that Nokia has encountered in recent years stem from the agreement between Alcatel and Lucent,” said Mr. Sarkamies.
The deal provided Nokia with two sets of equipment: one under the Nokia brand and one under the Alcatel-Lucent brand. Nokia told its customers, who are wireless providers, that it would replace Alcatel-Lucent equipment with Nokia equipment.
The company has said this process took more time and money than expected. Rather than investing in research and development like Huawei and Ericsson, Nokia had to focus on a complex integration of two large companies, Mr. Sarkamies said.
Write to Stu Woo at [email protected]
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