Nokia to Cut Up to 14,000 Jobs as Sales Drop 20% Amid Weak 5G Demand
STOCKHOLM/HELSINKI, Oct 19 (Reuters) – Nokia (NOKIA.HE) announced on Thursday that it will be reducing its workforce by up to 14,000 employees in an effort to cut costs. The decision came after the company experienced a 20% decline in third-quarter sales due to weaker demand for 5G equipment.
The Finnish telecommunications company, which produces equipment for telecom networks, saw its shares drop by 2% at 0900 GMT following the news.
The decline in sales can be attributed to a slowdown in the United States, particularly in the North American market where sales were down by 40% in Q3, according to Nokia’s CEO, Pekka Lundmark. The company has been forced to seek growth in other regions, such as India, but now India is also expected to normalize after a strong 2022.
“We simply don’t know when the market will recover,” Lundmark expressed in an interview with Reuters.
In order to achieve cost savings, Nokia is aiming to reduce its employee count from 86,000 to a range of 72,000-77,000 by 2026, representing a maximum of 16% job cuts. The company expects savings of between 800 million euros ($842 million) and 1.2 billion euros by 2026.
Lundmark emphasized the importance of protecting research and development during this restructuring process. Nokia anticipates saving at least 400 million euros in 2024, with an additional 300 million euros in 2025.
Ericsson, a competitor of Nokia, has also announced layoffs this year and has stated that the uncertainty in the industry will persist into 2024.
Although Nokia is uncertain about when the market will recover, the company believes that a more normal seasonal improvement in its network businesses can be expected in the fourth quarter. The company has not revised its full-year outlook.
The sluggish adoption of 5G technology by businesses has hampered the industry’s growth, causing telecom operators to struggle with their investment budgets and implement their own cost-cutting measures. BT Group and Vodafone are among the companies that have announced significant job cuts this year.
Kester Mann, an analyst at CCS Insight, expressed disappointment that the telecommunications industry, which was expected to thrive with the increasing demand for its services, is facing questions about its long-term future.
In order for the market to recover, Lundmark believes that the industry needs to invest in faster mid-band equipment to accommodate the growth in data traffic. Currently, only 25% of 5G base stations outside of China have mid-band equipment, which offers higher speeds.
Nokia reported quarterly comparable net sales of 4.98 billion euros, marking a decline from 6.24 billion euros in the same period last year. This missed the estimate of 5.67 billion euros, according to a poll conducted by LSEG.
($1=0.9493 euros)
Reporting by Supantha Mukherjee in Stockholm and Anne Kauranen in Helsinki; Editing by Anna Ringstrom, Clarence Fernandez, Barbara Lewis, and David Evans
Supantha Mukherjee leads the European Technology and Telecoms coverage and focuses on emerging technologies such as AI and 5G. With 18 years of journalistic experience, he joined Reuters in 2006 and has covered a variety of beats. He is based in Stockholm, Sweden.
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