Mass layoffs awaits at Nokia
The Finnish telecom company says that it is resetting its cost base to protect profitability. Part of this includes trimming the company to a 72,000 – 77,000 employee organisation, compared to the 86,000 employees Nokia has today.
Nokia has announced strategic and operational changes to its business and a program to reset its cost base. The company says that these actions aim to better position the company for longer-term growth as well as enabling Nokia to navigate the current market uncertainty.
"We continue to believe in the mid to long term attractiveness of our markets. Cloud Computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities. However, while the timing of the market recovery is uncertain, we are not standing still but taking decisive action on three levels: strategic, operational and cost," says Nokia’s President and CEO Pekka Lundmark in a press release.
Firstly, Nokia says it will accelerate its strategy execution by giving business groups more operational autonomy. Second, the company will streamline its operating model by embedding sales teams into the business groups and thirdly, Nokia will "reset its cost-base to protect profitability".
To address the uncertainty that exists in the market, Nokia says it will "reduce its cost base and increase operational efficiency while protecting its R&D capacity and commitment to technology leadership."
To do this, Nokia targets to lower its cost base on a gross basis (in other words before inflation) by between EUR 800 million and EUR 1.2 billion by the end of 2026 compared to 2023. This represents a 10–15% reduction in personnel expenses. Nokia says it expects to act quickly on the program with at least EUR 400 million of in-year savings in 2024 and a further EUR 300 million in 2025.
The cost reduction program is expected to lead to a 72,000 – 77,000 employee organisation compared to the 86,000 employees Nokia has today. Worst case scenario, 14,000 employees will leave the company.
However, the exact scale of the program will depend on the evolution of end market demand. The cost savings are expected to primarily be achieved in Mobile Networks, Cloud and Network Services and Nokia’s corporate functions.
“The most difficult business decisions to make are the ones that impact our people. We have immensely talented employees at Nokia and we will support everyone that is affected by this process. Resetting the cost-base is a necessary step to adjust to market uncertainty and to secure our long-term profitability and competitiveness. We remain confident about opportunities ahead of us,” explains Pekka Lundmark in the press release.