Nokia starts to sink; 10,000 jobs cut

Nokia starts to sink; 10,000 jobs cut

Summary: Nokia is cutting another 10,000 jobs as it continues to struggle in the face of iPhone and Android growth. Will the last one out turn the lights off?

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TOPICS: Nokia
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Nokia will lay off 10,000 jobs worldwide by the end of 2013, the Finnish phone giant said on Thursday.

Phone-making plants and research and development will also take a hit, including centers in Ulm, Germany and Burnaby, Canada. A manufacturing plant in Salo, Finland will close but its R&D efforts will remain there.

The company's management will also be shuffled, chief executive Stephen Elop said in a statement.

"These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia's long-term competitive strength."

That's corporate speak for: cut now, or face not being able to pay our employees later down the line. In simple terms, a cut of non-essential employees takes the heat off its falling operating margin.

Its plan to "return to sustainable adjusted operating profitability there as quickly as possible" has to come now or face the risk of posting an operating loss down the line. That's 'beginning of the end' talk for any business.

Nokia said its second-quarter adjusted operating margins for its phone unit would be "worse" than a loss equivalent to 3 percent of its first-quarter revenue. The company will also book a restructuring charge of €1 billion ($1.3bn).

Management shuffle, check. Reduction in operating costs, check. Job losses to skim off the top layer, check. All things point to "doing a RIM".

Who falls first: RIM or Nokia? The BlackBerry maker has a head start but Nokia is only a few steps behind, it seems.

(Shortly after this article was published, Wayne Smallman tweeted me: "Nokia and BlackBerry are like trains crashing in slow motion." It was too good not to share.)

In a fight for corporate survival, the signals show Nokia is losing the smartphone fight and has finally woken up to it. It doesn't take a genius to note it's the iPhone and Android smartphone battle that's hammering Nokia.

There are two things to note: employee count as assets, and how much cash the company has.

Nokia, unlike RIM, is relatively employee heavy. It can start hacking away at its employee base without hitting its operations too negatively.

Nokia already cut 4,000 jobs earlier this year and shifted its manufacturing core from Finland to Asia. It followed a 3,500 job cut in September 2011. A few in between: that’s 24,000 job losses since the former Microsoft executive took charge of the Finnish-based company.

Bloomberg reports Nokia had 53,500 workers at the end of March. We can probably knock that down a tier to roughly 45,000 give or take 5 percent.

RIM, on the other hand, had around 16,500 before the June layoffs.

RIM has a strong cash position it can dip into. It had more than $2 billion at the last count it can chip away at instead of cutting essential jobs it can't afford to lose.

Shareholders will not like the idea of it, but it's something at least.

Nokia's cash position appears healthy. As of December 2011, it stood at $14.2 billion making the company an attractive acquisition target. That figure has likely dropped by a billion or two since. But its share price has fallen by more than 70 percent in the last year.

Nokia's market cap puts the company's worth at $10.45 billion, down from $11.8 billion over a month ago. The phone giant could be bought for next to nothing at this point.

The likelihood is Nokia will not bounce back on its own. Microsoft could step in considering its "strategic partnership" with the phone maker. Microsoft provides the mobile operating system, and Nokia provides the phones. It's a relationship like no other, but as with any marriage, if one goes down and leaves a chunk of debt the other will suffer.

But following a report that Microsoft looked at Nokia as a tempting offer, not before backing away promptly unimpressed by what it saw, it seems somewhat unlikely.

We'll see where it goes from here. Nokia's second-quarter results will be an interesting one.

Image credit: Roger Cheng/CNET.

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Topic: Nokia

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19 comments
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  • Makes perfect sense to me

    When you're outsourcing/moving the handset builds to Asia, they no longer need the massive overheads of the factories in Finland anymore, so that makes perfect sense and thus is a completely difference situation to RIMM.
    GTRoberts100
  • Streamline?

    It's called streamlining, not sinking.
    DreyerSmit
  • Captain Elop Is Steering The Costa Nokia Concordia

    A man who is out of his depth steering a behemoth of a liner in to shallow dangerous waters. This only has one outcome.
    Alan Smithie
    • Elops mission

      Elop was sent to Nokia (by ballmer) with one mission, to force microsoft into the market. He would prefer WP to be successful, but he will take Nokia to bankruptcy, if necessary, to keep flogging it. He is already a rich man, so if this fails, it really will not change his lifestyle.
      normcf
  • Nokia will be back

    It???s difficult for Nokia to compete without shifting jobs to Asia. This cost cutting is necessary. With Win phone 8, Nokia can build super phones that could challenge Samsung, HTC and apple.
    owllnet
  • Hmm

    I would say, Nokia is finally acknowledging what I have been saying all alone... their phones have specs from 2 years ago and they are over priced... This move is nothing more than a way to make their phones competitve.
    slickjim
    • Care to explain

      How cutting jobs will make the two years old technology any different?

      Being sold for $0-100 in the US, the Nokia Lumia 900 is already pretty much competitive, if "competitive" is defined as dirty cheap. But increasing the number of free goods, or the number of subsidized goods does not make any company healthier.
      danbi
      • Subsidized "free" phones are sales to Nokia

        The carrier is the one that subsidizes the phone. They pay the manufacturer up front. Packing better components into that free phone makes it more appealing to the consumer.
        spatters71
  • Hate to see a good company suffer...

    but Elop's "All in" on Windows Phone before that OS had matured at Nokia is to blame. I owned 4 Nokia phones in a row before Windows Phone took all the air out of Symbian and/or Meego phones at Nokia. Switched to Android instead of WP. I still go to Conversations site periodically to see what they are doing. Mostly putting out Top Ten articles (i.e. making up content), kind of like what they did for a long time when they were putting all their resources into Windows Phone and they would trot out Nokia N8 camera articles day after day after day (i.e. N8 camera was about they only thing they had going for a few months).
    jkohut
  • This is on Stephen Elop...

    Easily one of the worst CEOs in recent times. Nokia was known for it's hardware. Instead of adopting an OS-agnostic strategy a la Samsung, he had to kiss up to his previous employers. He can't be fired soon enough.

    http://www.tech-thoughts.net/
    sameer_singh17
  • Pricing is important factor

    When NOKIA - MS joint partnership was declared I felt that they will give tough fight to Android and iPhone. The Windows OS on Nokia mobiles looks good and provides comparable performance; however its priced quite high for consumers. These phones demand contracts comparable to Samsung Galaxy 3 and iPhone 4S; so it is never going to sell.

    Get the pricing right before its too late! no streamlining will work if the devices do not sell.
    p.vinnie@...
  • Apple

    This same article could have been written about Apple in the 90s... and look at them now.
    clcrockett
  • No reason to count them out, yet.

    All these "restructuring" moves are quite necessary in advance of a M$ takeover. Going to be painful, however, to move mfg to asia. Little similarity to RIM, imo.
    droidfromsd
  • Nokia starts to sink; 10,000 jobs cut

    If those jobs aren't needed then they have no choice but to make the cuts. Every major company has had to do job cuts. We'll see how Nokia does in a year from now. Hopefully they will a presence on Verizon's network to increase sales.
    Loverock Davidson-
    • Oddly enough I agree with Lovey here. Since Nokia is

      moving it's manufacturing to Asia (Something that should have been done years ago by the way) then it makes sense that thousands of jobs would be cut.

      Pagan jim
      James Quinn
  • But how can this be?

    Didn't IDC recently command us to believe that Windows Phone will be top dog in four years?
    Mac_PC_FenceSitter
  • Pity..

    But, this was expected to happen, when Nokia announced they will junk their own investments and will go to bed with Microsoft.
    danbi
  • How Turnarounds Are Born

    It's refreshing to see Stephen Elop taking the necessary measures to turn Nokia around. Over the years of great success, Nokia became a bloated company. Now that times are lean, markets have changed, and market-share has waned, Nokia needed a strong leader to make difficult choices for the future. Many will crucify Elop over these decisions today and praise him 5 to 10 years from now. No, it's not easy seeing 10,000 people getting laid off every 6 months, but it's a proven business strategy for bringing a company out of the red and back to health around core-business assets. It's better than seeing the entire company fold and cash in their remaining chips. And it's necessary for Nokia to compete and turn around it's business. So I see it in that light and can't help but be amused by all of these articles predicting doom and gloom for Nokia. "Nokia Starts to Sink" - ? Really? Nokia's been shedding market share for 5 years now. But Nokia still has cash to restructure itself properly and avoid bankruptcy and Nokia still has a strategic partner who is more than willing to pump cash into it - to the tune of billions of dollars. I wouldn't count Nokia out just yet and expect to start seeing the makings of a spectacular turnaround in Q4-2012.
    InternetSecurityAnalyst
  • Nokia starts to sink; 10,000 jobs cut

    deja vu sun microsystem. they had money in the bank then, yet greedy investors decided that selling themselves to the highest bidder was the best for their investments. goodbye sun and good riddance. nokia is in the same boat, it depends on how their investors wanted to gamble what are left of their investments. for one thing they should kick out and throw away their worst ceo so far. i felt sick of watching good companies went/goes under because of bad management and lousy/greedy investors, but hey nobody wants his lifelong savings thrown into the wind...
    kc63092@...