STOCKHOLM (Reuters) – Nokia on Tuesday announced plans to cut up to 10,000 jobs within two years to cut costs and invest more in research capabilities as the Finnish telecom group seeks to step up its challenge to Swedish Ericsson and Chinese Huawei.
After taking the top job last year, Chief Executive Pekka Lundmark has made changes to recover from product flaws under the company’s previous management that hurt its 5G ambitions and dragged its stock.
He announced a new strategy in October under which Nokia will have four business groups, saying the company would “do whatever it takes” to take the lead in 5G as it also seeks a share of Huawei.
Lundmark is expected to present its long-term strategy, discuss action plans and set financial goals during the company’s capital markets day on Thursday.
The company said in a statement that it expects approximately 600 million euros ($ 715 million) to 700 million euros in restructuring and associated charges by 2023.
“Decisions that have a potential impact on our employees are never taken lightly,” Lundmark said in a statement. “My priority is to ensure that everyone affected by this process is supported.”
Nokia currently employs 90,000 people and has cut thousands of jobs following the 2016 acquisition of Alcatel-Lucent.
It expects the current restructuring to reduce its cost base by approximately EUR 600 million by the end of 2023. Half of the savings are expected to be realized in 2021.
“These plans are global and are likely to affect most countries,” said a Nokia representative. “In Europe, we have only just informed the local works councils and expect consultation processes to start shortly where appropriate.”
France, where Nokia cut more than a thousand jobs last year, was excluded from the current restructuring.
The savings program is bigger than expected, but what’s interesting is that it doesn’t really lead to lower costs, said Sami Sarkamies, an analyst at Nordea.
“The company is shifting its focus from overheads to research and development, which is expected to result in growth and better margins in the future,” he said.
Nokia plans to invest more in research and development and future capabilities, including 5G, cloud and digital infrastructure.
Under Lundmark’s predecessor, Nokia had downgraded its earnings outlook and halted dividend payments after product missteps depressed more than a fifth of its market value.
In February, Nokia expects sales to fall from € 21.9 billion in 2020 to € 20.6-21.8 billion ($ 25-26 billion) in 2021.
While both Nokia and Ericsson have gained more customers as more telecom operators start rolling out 5G networks, the Swedish company has an edge, thanks in part to winning 5G radio contracts in China.
Nokia has not secured any 5G radio contracts in China and also lost it to Samsung Electronics on part of a contract to supply 5G equipment to Verizon.
Nokia shares fell slightly in morning trading.
($ 1 = 0.8389 euros)
Reporting by Supantha Mukherjee in Stockholm and Essi Lehto in Helsinki; edited by Niklas Pollard and David Evans