STOCKHOLM (Reuters) – Nokia on Tuesday announced plans to cut up to 10,000 jobs in two years to cut costs and invest more in research capabilities as the Finnish telecommunications group wants to step up its challenge against Sweden’s Ericsson and the Chinese Huawei.
After taking office last year, CEO Pekka Lundmark has been making changes to recover from the product’s missteps under the company’s previous management, which hurt his 5G ambitions and dragged his actions.
He announced a new strategy in October, according to which Nokia will have four business groups and said the company would “do whatever it takes” to take the lead in 5G, as it is also engaged in capturing Huawei shares.
Lundmark is expected to present its long-term strategy, discuss action plans and set financial targets during the day of the company’s capital markets.
The company said in a statement that it expects about 600 million euros ($ 715 million) to 700 million euros of restructuring and associated charges by 2023.
“Decisions that can have a potential impact on our employees are never taken lightly,” Lundmark said in a statement. “My priority is to ensure that all affected people receive support during this process.”
Nokia currently has 90,000 employees and has cut thousands of jobs since the acquisition of Alcatel-Lucent in 2016.
It expects the current restructuring to reduce its cost base by about 600 million euros by the end of 2023. Half of the savings are expected to be made in 2021.
“These plans are global and are likely to affect most countries,” a Nokia representative said. “In Europe, we have only informed local works councils and hope that the consultation processes will start soon, if necessary.”
France, where Nokia cut more than a thousand jobs last year, was left out of the current restructuring.
The savings program is bigger than expected, but what’s interesting is that it won’t actually cut costs, said Sami Sarkamies, an analyst at Nordea.
“The company is shifting its focus from overhead costs to research and development, which is expected to generate growth and better margins in the future,” he said.
Nokia plans to increase investment in research and development and future capabilities, including 5G digital infrastructure, cloud and
Under Lundmark’s predecessor, Nokia had lowered its profit forecasts and stopped dividend payments, after the product’s missteps eliminated more than a fifth of its market value.
In February, Nokia expects revenue in 2021 to fall between 20.6 and 21.8 billion euros ($ 25-26 million), from 21.9 billion euros in 2020.
While both Nokia and Ericsson have been gaining more customers as more telecom operators begin to deploy 5G networks, the Swedish company has an advantage in part due to winning 5G radio contracts in China.
Nokia has not won any 5G radio contract in China and had also lost against Samsung Electronics a part of a contract to supply 5G equipment to Verizon.
Nokia shares fell marginally in the morning trade.
($ 1 = $ 0.8389)
Reports by Supantha Mukherjee in Stockholm and Essi Lehto in Helsinki; edition by Niklas Pollard and David Evans