Nokia Plans to Reduce Workforce by Up to 14,000 Amidst Diminishing US Demand
Nokia, announced its intention to slash up to 14,000 positions as part of a cost reduction strategy, following a 20% decline in third-quarter sales due to weakened demand for 5G equipment. The company's shares dipped 2% at 0900 GMT. The slowdown in the United States, a key market for Nokia and Ericsson, has compelled them to seek growth in other regions, such as India.
However, India is also anticipated to experience a slowdown after a robust 2022.
Nokia's CEO, Pekka Lundmark, described the market situation as exceptionally challenging, particularly in North America, where net sales plummeted by 40% in Q3. The company aims to achieve savings ranging from 800 million euros ($842 million) to 1.2 billion euros by 2026. Nokia expects to reduce its workforce from 86,000 to between 72,000 and 77,000 employees, potentially resulting in a 16% reduction in jobs. Lundmark emphasized the importance of preserving research and development.
Nokia anticipates cost savings of at least 400 million euros in 2024 and an additional 300 million euros in 2025. While Ericsson, which has also undergone significant layoffs this year, expressed concerns about ongoing business uncertainties extending into 2024, Nokia mentioned the likelihood of a more typical seasonal uptick in its network business in the fourth quarter and maintained its full-year outlook.
Lundmark stressed the necessity for the industry to invest in faster mid-band equipment to accommodate surging data traffic. Only 25% of 5G base stations globally, excluding China, currently employ mid-band technology, which offers higher 5G speeds. However, many telecom operators initially deployed cheaper low-band gear with lower speeds. Lundmark acknowledged sporadic signs of increased demand but cautioned against hasty assumptions of a broad-based trend.
In the third quarter, Nokia's comparable net sales dropped to 4.98 billion euros from 6.24 billion the previous year, falling short of a 5.67 billion euro estimate based on an LSEG poll.