Nokia announced its plans to trim its workforce, aiming to reduce the number of employees from the current 86,000 to a range of 72,000 to 77,000.
Nokia has also revealed that its Q3 net sales declined 20 percent to 4.982 billion euro as macroeconomic uncertainty and higher interest rates continue to pressure operator spending. Profit of Nokia also fell 69 percent to 133 million euro.
The strategic move is part of Nokia’s efforts to lower its cost base and increase profitability, while still upholding its commitment to research and development.
Nokia’s target is to reduce its cost base on a gross basis by approximately EUR 800 million to EUR 1,200 million by the end of 2026, compared to 2023 figures. This reduction in personnel expenses represents a significant 10 percent to 15 percent reduction. The company anticipates rapid results, with at least EUR 400 million in-year savings expected in 2024 and an additional EUR 300 million in 2025.
The scale of this employee reduction program is contingent on the evolving demands of the market and will be influenced by inflation. The primary focus of cost savings is expected in areas such as Mobile Networks, Cloud and Network Services, as well as Nokia’s corporate functions. The one-time restructuring charges and cash outflows are projected to be similar to the annual cost savings achieved.
Nokia’s President and CEO, Pekka Lundmark, emphasized, “We are taking decisive action on three levels: strategic, operational, and cost. We are accelerating our strategy execution, streamlining our operating model, and resetting our cost-base to protect profitability.”
To accelerate its strategic execution, Nokia is granting more operational autonomy to its four business groups. This approach will enable these groups to respond more effectively to opportunities within their specific markets, engage with both existing and new customers, and invest in technology leadership.
Additionally, Nokia is embedding sales teams into each of the business groups, allowing them to build stronger relationships with customers, make quicker decisions based on customer needs, and better address growth opportunities. Collaboration among these sales teams will ensure that customers continue to benefit from Nokia’s extensive offerings.
As part of the restructuring, Nokia will also shift to a leaner corporate center that will provide strategic oversight and guidelines for financial performance, portfolio development, and compliance, while reaffirming its commitment to long-term research through Nokia Bell Labs.
This move underscores Nokia’s determination to navigate the evolving technology landscape while maintaining a strong position in the market. The exact number of job cuts and the program’s magnitude will depend on the future market dynamics and the impact of inflation on cost savings.
Investors, employees, and industry stakeholders will closely watch the progress and results of this transformational initiative by Nokia.