Finnish technology telecom group Nokia announced a major revamping of its business on Thursday (October 19) including layoffs of 14,000 jobs, or about 16% of its workforce, over the next three years.
The substantial layoffs come after Nokia reported third-quarter net sales declined 20% year-on-year to 4.98 billion euros. Profit over the period plunged by 69% year-on-year to 133 million euros.
Currently, the tech giant employs 86,000 people and said the “reset” would reduce its costs by as much as 1.2 billion euros, or roughly $1.3 billion.
According to CEO Pekka Lundmark said in a statement, “In the third quarter we saw an increased impact on our business from the macroeconomic challenges. The most difficult business decisions to make are the ones that impact our people.”
“In the face of a challenging market environment, we will reduce our cost base to protect our profitability,” Lundmark remarked.
It was reported that the job cut was a part of a new cost savings plan after third-quarter sales dropped 20% due to slowing sales of 5G equipment in markets such as North America.
The company is targeting between €800 million (RM3.9 billion) and €1.2 billion in cost savings by 2026 as it seeks to be on track to deliver its long-term comparable operating margin plan of at least 14% by 2026.
“Nokia expects to act quickly on the programme with at least €400 million of in-year savings in 2024 and a further €300 million in 2025,” the company said.
Nokia once led the global mobile phone market, but it quickly fell behind the iPhone, which Apple released in 2007. Nokia sold its mobile phone division to Microsoft in 2013. Since then, it has focused on selling the back-end infrastructure of telecom systems to wireless companies, cable operators and other business buyers.
Nokia said that “macroeconomic uncertainty and higher interest rates continue to pressure” its customers. The company has also been struggling after losing out on market share in 5G technology to rivals in China, according to a telecom analyst in Copenhagen. Chinese companies, led by Huawei, control nearly half the global 5G market.
Nokia halted sales in Russia in March 2022 after Russia’s invasion of Ukraine. At the time, the company had been selling equipment to MTS, Russia’s largest telecom service provider. Documents obtained by The New York Times revealed that Nokia had been enabling a Russian surveillance system for almost a decade.
Nokia isn’t the only Western telecom group to face cuts, Nokia’s announcement follows tens of thousands of job cuts across the tech sector this year.
British telecom group BT said in May that it would axe up to 55,000 jobs by the end of the decade.
Tech giants Meta and Microsoft have revealed plans to reduce their workforce by as many as 10,000 employees this year.
In January, online retail giant Amazon announced it was cutting over 18,000 jobs worldwide and Google parent company Alphabet announced cuts of around 12,000 people.
