Daily Times

As part of a cost-cutting initiative, Nokia has announced a significant reduction in staff, with up to 14,000 jobs potentially being eliminated. This announcement follows a sharp decline in third-quarter sales of 20%, primarily due to a decline in the demand for 5G equipment.

As a result of the news, the company’s shares fell by 2% at 0900 GMT.

This choice was significantly influenced by the slowdown in the United States, a crucial market for Nokia. Nokia had been searching for growth opportunities in other areas, particularly India, along with its rival Ericsson. But now, even India is anticipated to return to normal after a successful 2022.

Pekka Lundmark, the CEO of Nokia, emphasized the difficult market conditions. He mentioned that net sales in their most important market, North America, fell by 40% in the third quarter. Nokia wants to save between 800 million euros ($842 million) and 1.2 billion euros by 2026 in response to these difficulties.

The company plans to reduce its workforce from its current level of 86,000 to between 72,000 and 77,000 workers as part of this cost-cutting strategy, which, at the high end of the range, would represent job losses of up to 16%. Lundmark emphasized the importance of safeguarding R&D.

By 2024, Nokia hopes to save at least 400 million euros, with an additional 300 million in 2025. Competitor Ericsson, which has also experienced sizable layoffs this year, has stated that the uncertainties affecting its business will last until 2024.

Despite the difficulties, Nokia did not change its forecast for the entire year, and Lundmark expressed confidence in the industry’s mid-to-long-term potential. He emphasized the need for the industry to invest in faster mid-band equipment to handle the increasing data traffic, but he also pointed out the lack of certainty regarding when the market would recover. Only 25% of 5G base stations outside of China have mid-band technology at the moment.

Although the industry had initially predicted that the arrival of 5G would usher in an era of automation and driverless cars, this technology’s uptake has lagged behind schedule. Due to financial difficulties, telecom operators have had to take cost-cutting measures. For instance, the UK-based BT Group had announced plans to eliminate 55,000 jobs, while Vodafone intended to eliminate 11,000 jobs.

Kester Mann, an analyst at CCS Insight, commented on the situation, saying, “This should be an industry that’s flying high, buoyed by unrelenting demand for its services … instead, countless questions continue to be posed around operators’ relevance and long-term future.”

In conclusion, Nokia’s decision to reduce its workforce is a reaction to a difficult business environment brought on by a decline in the demand for 5G equipment and a lack of certainty about the market’s ability to recover. As it navigates these challenges, the company hopes to save a lot of money.