Nokia, the Finnish telecom equipment giant, faced a significant setback in its third-quarter sales, experiencing a 20% decline, with comparable net sales dropping to 4.98 billion euros ($5.25 billion) from 6.24 billion euros the previous year. This dip was primarily attributed to a slowdown in the demand for 5G equipment, especially in key markets like North America. To counter this downturn, Nokia has unveiled a comprehensive cost-saving strategy and, in line with this, announced plans to reduce its workforce by up to 14,000 jobs.
Nokia is planning to save a big haul of money, hoping to cut costs between 800 million euros ($842 million) and 1.2 billion euros by 2026. This move is crucial for Nokia to reach its long-term goal of having a comparable operating margin of at least 14% by 2026. To make this happen, Nokia is making changes in how it’s organized, which will lead to having 72,000-77,000 employees instead of the current 86,000.Nokia’s stated objective is to act swiftly on this program, with anticipated in-year savings of 400 million euros in 2024 and an additional 300 million euros in 2025. While this restructuring aims at significant financial improvements, the ultimate impact will depend on the levels of cost inflation in the market.
“While our third quarter net sales were impacted by the ongoing uncertainty, we expect to see a more normal seasonal improvement in our network businesses in the fourth quarter,” Chief Executive Pekka Lundmark said. Despite the current headwinds, Lundmark also highlighted Nokia’s commitment to strategic oversight and guidelines, preserving spending on research and development, and granting more autonomy to business units. This approach aligns with Nokia’s goal of transitioning to a leaner corporate center.
The cost-cutting measures are deemed necessary to navigate market uncertainties effectively and ensure Nokia’s long-term profitability and competitiveness. “Resetting the cost-base is a necessary step to adjust to market uncertainty and to secure our long-term profitability and competitiveness,” Lundmark said.
