Nokia Corp.
ENOUGH -0.35%
plans to cut between 5,000 and 10,000 jobs over the next two years, a move that said it would make it more competitive in the 5G equipment market against rivals Huawei Technologies Co. and Ericsson AB.
Reducing jobs would reduce the Finnish company’s current workforce by about 90,000 workers to 11% and reduce its cost base by about $ 700 million, the company said Tuesday. He said the savings would offset increased investment in research and development, among other areas.
Nokia is in the early stages of its second major restructuring program in less than a decade. After selling its dominant phone business, Nokia acquired French rival Alcatel-Lucent to focus on the manufacture of mobile antennas, Internet routers and other telecommunications equipment. But it has lost ground to Huawei and Ericsson because of its struggles to integrate Alcatel-Lucent, as well as because of a mistake in acquiring computer chips that made its products more expensive and less desirable.
A man scans a QR code at the Nokia booth at the Mobile World Congress in Shanghai in February.
Photo:
alex plavevski / Shutterstock
Nokia’s revenue share in the total telecommunications equipment market fell to 15% last year, from 16% in 2019, according to research firm Dell’Oro Group, while Huawei rose its advantage up to 31% of 28% over the same period.
Last year Nokia replaced CEO Rajeev Suri with Pekka Lundmark, who said the company would withdraw its previous plan to offer a range of products to focus on becoming a leader in cellular technology. 5G. The company said Tuesday it would streamline its product portfolio and continue to cut costs. He plans to announce more details on his strategy on Thursday.
Part of Nokia’s challenges come from the company that damaged 5G launches around the world. Mobile phone companies started buying 5G equipment earlier than expected and Nokia had not yet gotten enough cheap and efficient computer chips to get into their mobile device. They had their rivals. As a result, Nokia’s products were more expensive and less energy efficient than those of its competitors.
In the United States, Nokia lost a major 5G equipment contract with Verizon Communications last year Inc.
and Samsung Electronics Co.
It did not win any major mobile phone contracts in its long Chinese market, where Ericsson has become the leading foreign provider of 5G equipment.
Nordea analyst Sami Sarkamies said Nokia has a chance to be more competitive after the restructuring, mainly because the US campaign to curb Huawei has caused the industry leader to lose market share outside the China.
After losing the smartphone revolution, Nokia sold its mobile phone business to Microsoft for $ 7 billion in 2013. The company decided to double the remaining telecommunications equipment business by buying Alcatel-Lucent for $ 17 billion. of dollars in 2015, an action aimed at expanding its product offering.
That turned out to be a mistake, analysts said. “Many of the problems Nokia has experienced in recent years come from the Alcatel-Lucent deal,” Sarkamies said.
The deal left Nokia with two teams: one under the Nokia brand and one under the Alcatel-Lucent brand. Nokia told its customers, who are mobile operators, that it would replace the Alcatel-Lucent computer with Nokia equipment.
The company has said the process needed more time and money than expected. Instead of investing in research and development as Huawei and Ericsson did, Nokia had to focus on a complex integration of two large companies, Sarkamies said.
Write to Stu Woo to [email protected]
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