Nokia will cut 10,000 jobs, or 19 percent of its workforce, by the end of 2013, as part of efforts to improve its operating model and return the company to growth, the phone makers executives told investors June 14.
The plan calls for the closing of a manufacturing facility in Salo, FinlandNokias largest in its home countryas well as facilities in Ulm, Germany, and Burnaby, Canada. The company also plans to consolidate some manufacturing operations, to reduce noncore assets and to streamline its IT, corporate and support staffs.
Additionally, three high-level executivesMary McDowell, Niklas Savander and Jerri DeVard have stepped down and their positions filled, effective July 1, by promotions within the company.
“These planned reductions are a difficult consequence of the intended actions we believe we must take to ensure Nokia’s long-term competitive strength,” Nokia CEO Stephen Elop said in a June 13 statement. “We do not make plans that may impact our employees lightly, and as a company, we will work tirelessly to ensure that those at risk are offered the support, options and advice necessary to find new opportunities.”
Unable to compete against Apple’s iPhone and smartphones running Google’s Android platform, the former longtime mobile phone leader posted a loss of approximately $2 billion U.S. dollars during the first quarter. It warned investors that its losses would likely be even greater in the second quarter, which ends June 30.
Elop, a former Microsoft executive, announced shortly after gaining the CEO title that Nokia was in the type of dire situation that required a perhaps previously unthinkable solution: In a well-circulated email to employees, he compared Nokia to a man on a burning platform in a frigid sea who must choose to face the flames or the freezing water. Shortly afterward, he announced that Nokia’s major operating system going forward would be Microsoft’s Windows Phone, instead of its long-supported (but losing luster) Symbian platform.
With Microsoft, Nokia launched its Lumia smartphone line, which has been well-received by reviewers and sold in decent numbers. Canaccord Genuity checks, analysts shared in a June 5 research note, found the Nokia Lumia 900 to be the second-best-selling phone at AT&T during April and May, behind the Apple iPhone 4S. Still, during both months, the investment firm found Nokia to be the fifth-best-selling brand, behind Apple, Samsung, Motorola and HTC, respectively.
“We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia,” said Elop. “We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must reshape our operating model and ensure that we create a structure that can support our competitive ambitions.”
Apple owns both its hardware and software, which has been part of its success, and it’s suggested that Google, with its recent acquisition of Motorola, is striving for a similar model. While the example of BlackBerry maker Research In Motion proves this formula doesn’t guarantee success, Nokia’s financial struggles have prompted talk of a potential takeover, and Microsoft, with part of its fortunes now entwined with Nokia’s, has been named as a likely candidate.
According to a report from The New York Times, Elop said during the call that both companies expect to benefit from the launch of Windows 8 later this year. The OS will have mobile features and allow for the integration of services across a number of mobile platforms.
“A major question,” said The Times report, “is whether Nokia on its own can bridge the transition to a Windows-based future.”