Why Nokia laid off 1,000 workers today

Nokia lays off 1,000 workers in Finland as it moves to slim down and muscle up on its way to mobile competitiveness. Here's how it fits into the plan.
Written by Andrew Nusca, Contributor

They're beginning anew in Espoo.

Finnish mobile company Nokia took another step toward its realignment today as it laid off 1,000 factory workers in Salo, Finland, according to various news reports.

The reason? Scale and proximity. As high-tech hardware manufacturing has shifted almost entirely to Asia, Nokia found itself standing flat-footed, with smaller factories in Hungary, Mexico, Romania and Finland still part of the manufacturing equation. The mobile device has gone global, but Nokia is still positioned on the ground like it's 2000.

The far-flung factories will remain, of course. But instead of hardware, they'll be reborn as hives of market-specific software. Whether that's a savvy decision or not remains to be seen -- having locals work on the local portions of products certainly feels right -- but what is smart is that Nokia is finally beginning to take steps that make sense to the outside observer.

When chief executive Stephen Elop arrived from Microsoft, it was very clear that Nokia could not continue on the same path. Sure, it worked brilliantly at one point in the company's not-so-distant history, but the industry environment in which it operated changed rapidly and dramatically -- and Nokia kept on walking in the same direction anyway.

These layoffs show Elop executing on his announced plans: simply, it's time to move on. (Or as he put more eloquently in an internal memo in early 2011: "We are standing on a burning platform." Not a good location to generate jobs or profits, unless you're in the business of selling fire extinguishers.)

But it won't be moving on with its customers; rather, it will be trying to convince them that the company can be relevant again. Elop is hitching Nokia's future success to his former company in Redmond, which has an equally long list of reasons to unseat Google and Apple in the mobile space. If Nokia can get its existing operations sorted, it can subsequently concentrate on how to act with them.

Easier said than done, of course. In 2010, ZDNet editor-in-chief Larry Dignan listed six things Elop needed to do to succeed. Among them: ditch poorly-performing ventures; move mobile devices faster; direct R&D spend more effectively; get U.S. traction. With these layoffs, it's that second point we're watching Elop address.

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